Macroprudential Policies and Dollarisation: Implications for the Financial System and a Cross-Exchange Rate Regime Analysis

Fisnik Bajrami

No 2024/7, Working Papers IES from Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies

Abstract: Macroprudential policy has gained prominence for promoting financial stability. In this paper, we assess the effectiveness of macroprudential policy in reducing credit growth over a 22-year period across 129 countries. Additionally, we investigate the interaction between macroprudential policy, dollarisation, and various exchange rate regimes, examining their impact on different financial stability indicators. Our findings indicate that macroprudential policy significantly reduces credit growth within a quarter of implementation, though this is not evident in the case of soft peg exchange rate regimes. Furthermore, our analysis reveals that dollarised countries exhibit superior outcomes in financial stability when compared to alternative exchange rate regimes.

Keywords: macroprudential policy; dollarisation; exchange rate; credit growth; non-performing loans; inflation; interest rates; empirical evaluation (search for similar items in EconPapers)
JEL-codes: E42 E52 E58 (search for similar items in EconPapers)
Pages: 66 pages
Date: 2024-02, Revised 2024-02
New Economics Papers: this item is included in nep-ban, nep-cba, nep-fdg, nep-mon and nep-tra
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Persistent link: https://EconPapers.repec.org/RePEc:fau:wpaper:wp2024_07

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