Examining macroprudential policy and its macroeconomic effects - some new evidence

Soyoung Kim and Aaron Mehrotra

No 825, BIS Working Papers from Bank for International Settlements

Abstract: In this paper, we provide empirical evidence about the broader macroeconomic effects of macroprudential policies and the underlying transmission mechanism, as well as the response of macroprudential policy to financial risks. To this end, we use structural panel vector autoregressions and a dataset covering 32 advanced and emerging economies. We show that macroprudential policy shocks have effects on real GDP, the price level and credit that are very similar to those of monetary policy shocks, but the detailed transmission of the two policies is different. Whereas macroprudential policy shocks mostly affect residential investment and household credit, monetary policy shocks have more widespread effects on the economy. Moreover, while positive credit shocks are generally met with tighter macroprudential policy, macro-financial country characteristics such as the exchange rate regime and the level of financial development affect the policy response.

Keywords: macroprudential policy; monetary policy; credit; macroeconomic effect; macroprudential policy response (search for similar items in EconPapers)
JEL-codes: E58 E61 G28 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2019-12
New Economics Papers: this item is included in nep-cba, nep-fdg, nep-mac, nep-mon and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)

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Related works:
Journal Article: Examining macroprudential policy and its macroeconomic effects – Some new evidence (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:bis:biswps:825

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