## Macroprudential Policies, Economic Growth, and Banking Crises

_IMF Working Papers, May 22, 2020_

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**Canonical URL:** [Macroprudential Policies, Economic Growth, and Banking Crises](https://www.imf.org/en/publications/wp/issues/2020/05/22/macroprudential-policies-economic-growth-and-banking-crises-49264)

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## Bibliographic details
- Authors: Mohamed Belkhir, Bertrand Candelon, Jean-Charles Wijnandts
- Published: May 22, 2020
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781513536989.001

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### Summary
- Using a sample that covers more than 100 countries over the 2000-2017 period, the paper assesses the impact of macroprudential policies on financial stability.
- The analysis examines whether the activation of macroprudential policies is conducive to a lower incidence of systemic banking crises.
- The empirical setup accounts for potential direct and indirect effects that macroprudential policies can have on banking crises.
- A Generalized Impulse Response Function analysis of a dynamic system composed of the probability of a banking crisis and economic growth is used to evaluate net effects.

### Key findings
- Macroprudential policies exert a direct stabilizing effect on financial stability.
- Macroprudential policies also produce an indirect destabilizing effect by depressing economic growth.
- Despite the indirect effect, the Generalized Impulse Response Function analysis reveals that macroprudential policies have a positive net effect on financial stability, manifested as a lower likelihood of systemic banking crises.

### Methodology and scope
- Sample: more than 100 countries.
- Time period: 2000-2017.
- Empirical approach: setup designed to capture direct and indirect channels from macroprudential policies to banking crises; Generalized Impulse Response Function analysis applied to a dynamic system linking crisis probability and economic growth.

### Policy implications
- Activation of macroprudential policies contributes to reducing the likelihood of systemic banking crises through a net stabilizing effect.
- Policymakers should account for both direct stabilizing benefits and potential indirect growth-depressing effects when designing and timing macroprudential interventions.

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_Source: https://www.imf.org/en/publications/wp/issues/2020/05/22/macroprudential-policies-economic-growth-and-banking-crises-49264_