{ "title": "Handle with Care: Regulatory Easing in Times of COVID-19", "publication": "IMF Working Papers, February 26, 2021", "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2021/02/26/handle-with-care-regulatory-easing-in-times-of-covid-19-50126", "canonical": "https://www.imf.org/en/publications/wp/issues/2021/02/26/handle-with-care-regulatory-easing-in-times-of-covid-19-50126", "overlayPath": "/en/publications/wp/issues/2021/02/26/handle-with-care-regulatory-easing-in-times-of-covid-19-50126/index.md", "summary": "The policy response to the COVID-19 shock included regulatory easing across many jurisdictions to facilitate the flow of credit to the economy and mitigate a further ampli-fication of the shock through tighter financial conditions.", "sections": [ { "heading": "Overview", "content": "- Title: Handle with Care: Regulatory Easing in Times of COVID-19\n- Authors: Fabian Valencia, Richard Varghese, Weijia Yao, Juan Yepez\n- Date: February 26, 2021\n- Core objective: Examine how stock prices reacted to regulatory easing announcements during the COVID-19 shock to assess effects on financial conditions and the flow of credit." }, { "heading": "Methodology", "content": "- Empirical approach: Intraday event study.\n- Sample: 18 advanced economies and 8 emerging markets.\n- Key variable of interest: Stock prices as a driver of financial conditions.\n- Focus: Regulatory easing announcements across jurisdictions and across regulatory tools (capital regulation, liquidity regulation), and comparison with non-regulatory financial measures." }, { "heading": "Key Findings", "content": "- Overall effect:\n - Regulatory easing announcements contributed to looser financial conditions.\n - Effects varied across sectors and tools.\n- Sectoral effects:\n - Financial regulatory easing led to lower valuations for financial sector stocks.\n - Financial regulatory easing led to higher valuations for non-financial sector stocks, particularly for industries that are more dependent on bank financing.\n- Tool-specific effects:\n - Announcements related to easier bank capital regulation: valuations declined and financial conditions tightened.\n - Announcements related to liquidity regulation easing: equity valuation rose and financial conditions loosened.\n- Other measures:\n - Effects from non-regulatory financial measures appear to be generally more muted." }, { "heading": "Policy Implications and Interpretations", "content": "- Differentiated impact: Regulatory easing is not uniform—capital and liquidity measures can have opposite effects on equity valuations and overall financial conditions.\n- Trade-offs for policymakers:\n - Easing capital regulation may tighten financial conditions via lower financial-sector valuations.\n - Easing liquidity regulation may loosen financial conditions and raise equity valuations.\n- Consideration for credit flow objectives:\n - Regulatory easing can facilitate the flow of credit, but tool selection matters for sectoral valuations and overall financial stability.\n\n---\n\n Content in this bundle\n\n- Working Paper\n - Working Paper (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - Working Paper (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2021/02/26/handle-with-care-regulatory-easing-in-times-of-covid-19-50126" } ], "bullets": [ "[Markdown version](/en/publications/wp/issues/2021/02/26/handle-with-care-regulatory-easing-in-times-of-covid-19-50126/index.md)", "[Structured JSON version](/en/publications/wp/issues/2021/02/26/handle-with-care-regulatory-easing-in-times-of-covid-19-50126/index.json)", "[Bundle manifest](/en/publications/wp/issues/2021/02/26/handle-with-care-regulatory-easing-in-times-of-covid-19-50126/bundle-manifest.json)", "Authors: Fabian Valencia, Richard Varghese, Weijia Yao, Juan Yepez", "Published: February 26, 2021", "Series: IMF Working Papers", "DOI: https://doi.org/10.5089/9781513570631.001", "Title: Handle with Care: Regulatory Easing in Times of COVID-19", "Authors: Fabian Valencia, Richard Varghese, Weijia Yao, Juan Yepez", "Date: February 26, 2021", "Core objective: Examine how stock prices reacted to regulatory easing announcements during the COVID-19 shock to assess effects on financial conditions and the flow of credit.", "Empirical approach: Intraday event study.", "Sample: 18 advanced economies and 8 emerging markets.", "Key variable of interest: Stock prices as a driver of financial conditions.", "Focus: Regulatory easing announcements across jurisdictions and across regulatory tools (capital regulation, liquidity regulation), and comparison with non-regulatory financial measures.", "Overall effect:", "Sectoral effects:", "Tool-specific effects:", "Other measures:", "Differentiated impact: Regulatory easing is not uniform—capital and liquidity measures can have opposite effects on equity valuations and overall financial conditions.", "Trade-offs for policymakers:", "Consideration for credit flow objectives:", "**Working Paper**" ], "related": [ { "title": "Working Paper", "role": "paper", "sourceUrl": "https://www.imf.org/-/media/files/publications/wp/2021/english/wpiea2021049-print-pdf.pdf", "summary": { "path": "/-/media/files/publications/wp/2021/english/wpiea2021049-print-pdf.pdf.md", "mime": "text/markdown" }, "binary": { "path": "/-/media/files/publications/wp/2021/english/wpiea2021049-print-pdf.pdf", "mime": "application/pdf" } } ], "alternates": { "markdown": "/en/publications/wp/issues/2021/02/26/handle-with-care-regulatory-easing-in-times-of-covid-19-50126/index.md", "json": "/en/publications/wp/issues/2021/02/26/handle-with-care-regulatory-easing-in-times-of-covid-19-50126/index.json", "bundleManifest": "/en/publications/wp/issues/2021/02/26/handle-with-care-regulatory-easing-in-times-of-covid-19-50126/bundle-manifest.json" }, "generatedAtUtc": "2026-09-16T19:00:33.564Z" }