Credit Supply Responses to Reserve Requirement: loan-level evidence from macroprudential policy

João Barroso, Rodrigo Gonzalez and Bernardus Van Doornik

No 467, Working Papers Series from Central Bank of Brazil, Research Department

Abstract: This paper estimates the impact of reserve requirements (RR) on credit supply in Brazil, exploring a large dataset with several policy shocks. We use a difference-in-difference strategy; first in a long panel, then in a cross-section exploring the effects of changes in RR on credit. In the first case, we average several RR changes from 2008 to 2015 using a macroprudential policy index. In the second, we use the bank-specific regulatory change to estimate credit supply responses from (1) a countercyclical easing policy implemented to alleviate a credit crunch in the aftermath of the 2008 global crisis; and (2) from its related tightening. We find evidence of a lending channel where more liquid banks mitigate RR policy. Exploring the two phases of countercyclical policy, we find that the easing impacted the lending channel on average two times more than the tightening. Foreign and small banks mitigate theses effects.

Date: 2017-11
New Economics Papers: this item is included in nep-ban, nep-cba, nep-mac and nep-mon
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Citations: View citations in EconPapers (23)

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Working Paper: Credit supply responses to reserve requirement: loan-level evidence from macroprudential policy (2017)
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