Can macroprudential measures make cross-border lending more resilient?

Elod Takats and Judit Temesvary

No 683, BIS Working Papers from Bank for International Settlements

Abstract: We study the effect of macroprudential measures on cross-border lending during the taper tantrum, which a saw strong slowdown in cross-border bank lending to some jurisdictions. We use a novel dataset combining the BIS Stage 1 enhanced banking statistics on bilateral cross-border lending flows with the IBRN's macroprudential database. Our results suggest that macroprudential measures implemented in borrowers' host countries prior to the taper tantrum significantly reduced the negative effect of the tantrum on cross-border lending growth. The shock-mitigating effect of host country macroprudential rules are present both in lending to banks and non-banks, and are strongest for lending flows to borrowers in advanced economies and to the non-bank sector in general. Source (lending) banking system measures do not affect bilateral lending flows, nor do they enhance the effect of host country macroprudential measures. Our results imply that policymakers may consider applying macroprudential tools to mitigate international shock transmission through cross-border bank lending.

Keywords: taper tantrum; cross-border claims; macroprudential policy; diff-in-diff analysis (search for similar items in EconPapers)
JEL-codes: F34 F42 G21 G38 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2017-12
New Economics Papers: this item is included in nep-ban, nep-cba, nep-ifn and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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