Effects of Macroprudential Policy: Evidence from Over 6,000 Estimates

IMF Working Papers, May 22, 2020

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Canonical URL: Effects of Macroprudential Policy: Evidence from Over 6,000 Estimates

Authors: Juliana Dutra Araujo, Manasa Patnam, Adina Popescu, Fabian Valencia, Weijia Yao
Published: May 22, 2020
Series: IMF Working Papers
DOI: https://doi.org/10.5089/9781513545400.001

Authors: Juliana Dutra Araujo, Manasa Patnam, Adina Popescu, Fabian Valencia, Weijia Yao
Publication date: May 22, 2020
Paper builds a novel database drawing from 58 empirical studies, comprising over 6,000 results on a wide range of instruments and outcome variables.
Database contains information on statistical significance, standardized magnitudes, and other characteristics of the estimates.
Analysis uses meta-analysis techniques to estimate average effects.

Statistically significant effects on credit, with considerable heterogeneity across instruments.
Weaker and more imprecise effects on house prices.
Quantitatively stronger effects:
- in emerging markets, and
- among studies using micro-level data.
Statistically significant evidence of leakages and spillovers.
Relatively stronger impacts for tightening than loosening actions.
Negative effects on economic activity in the near term.

Source base: 58 empirical studies.
Total estimates compiled: over 6,000 results.
Information captured: statistical significance, standardized magnitudes, and other characteristics of estimates.
Analytical approach: meta-analysis techniques to estimate average effects across studies.

Macroprudential instruments can materially affect credit outcomes, but effectiveness varies substantially by instrument.
Limited and imprecise impacts on house prices suggest caution in relying on macroprudential tools alone to stabilize housing markets.
Stronger measured effects in emerging markets and in micro-data studies indicate context and data granularity matter for policy evaluation.
Evidence of leakages and spillovers underscores the need for cross-border and cross-sectoral coordination when designing macroprudential measures.
Tighter macroprudential stances tend to produce stronger immediate impacts than loosening, but may induce near-term negative effects on economic activity, implying trade-offs between financial stability and short-term growth.

Source: "Effects of Macroprudential Policy: Evidence from Over 6,000 Estimates", IMF Working Papers, May 22, 2020.