Policy measures in the deleveraging process: A macroprudential evaluation

Velimir Bole, Janez Prašnikar and Domen Trobec

Journal of Policy Modeling, 2014, vol. 36, issue 2, 410-432

Abstract: This paper evaluates post-crisis effects of deleveraging policy in Slovenia. Reductions in banks’ credits to nonfinancial sectors were driven by increased collateralization, credit rationing, and a neglect of cash flow performance of banking clients. These jeopardized the normal deleveraging of companies with positive cash flows, and rolling over credits, which stifled economic growth. Erroneous sequencing, timing, and calibration of measures steering the deleveraging process generated these processes. Optimal deleveraging process demands that the Central Bank also focus on the stability of the financial system. This task should be a constitutional part of the third macro policy pillar, namely macroprudential policy.

Keywords: Balance sheet crisis; Collateral; Deleveraging; Cash flow; Banks; Illiquidity (search for similar items in EconPapers)
JEL-codes: E61 G18 G21 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jpolmo:v:36:y:2014:i:2:p:410-432

DOI: 10.1016/j.jpolmod.2014.01.007

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