IMF Working Papers

Leakages from Macroprudential Regulations: The Case of Household-Specific Tools and Corporate Credit

By Apoorv Bhargava, Lucyna Gornicka, Peichu Xie

April 29, 2021

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Apoorv Bhargava, Lucyna Gornicka, and Peichu Xie. Leakages from Macroprudential Regulations: The Case of Household-Specific Tools and Corporate Credit, (USA: International Monetary Fund, 2021) accessed November 8, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

Sector-specific macroprudential regulations increase the riskiness of credit to other sectors. Using firm-level data, this paper computed the measures of the riskiness of corporate credit allocation for 29 advanced and emerging economies. Consistently across these measures, the paper finds that during credit expansions, an unexpected tightening of household-specific macroprudential tools is followed by a rise in riskier corporate lending. Quantitatively, such unexpected tightening during a period of rapid credit growth increases the riskiness of corporate credit by around 10 percent of the historical standard deviation. This result supports early policy interventions when credit vulnerabilities are still low, since sectoral leakages will be less important at this stage. Further evidence from bank lending standards surveys suggests that the leakage effects are stronger for larger firms compared to SMEs, consistent with recent evidence on the use of personal real estate as loan collateral by small firms.

Subject: Bank credit, Corporate sector, Credit, Economic sectors, Financial sector policy and analysis, Macroprudential policy, Macroprudential policy instruments, Money

Keywords: Bank credit, Bond credit ratio ma, Corporate sector, Credit, Credit riskiness, Credit vulnerability, Global, Leakage effect, Macroprudential policy, Macroprudential policy instruments, Standards survey

Publication Details

  • Pages:

    35

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 2021/113

  • Stock No:

    WPIEA2021113

  • ISBN:

    9781513573731

  • ISSN:

    1018-5941

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