Macroprudential Regulation and Sector-Specific Default Risk

Mohamed Belkhir, Sami Ben Naceur, Bertrand Candelon and Jean-Charles Wijnandts

No 2022/141, IMF Working Papers from International Monetary Fund

Abstract: This paper studies the transmission of macroprudential policies across both financial and non financial sectors of the economy. It first documents that tighter macroprudential regulations implemented in Europe over the period 2008–2017 lowered default risk not only in the financial, but also in non-financial sectors. Second, the paper analyzes the impact of two reforms in the macroprudential framework. Higher capital requirements improve the long-run resilience of the financial sector but at the cost of raising long-term default risk in non-financial sectors. Strengthening the resolution framework for failing banks has beneficial long-run effects on the default risks of the financial and non-financial sectors. Our results concur with the literature documenting how banks adjust their balance sheet composition and credit supply in reaction to changes in their regulatory environment.

Keywords: Macroprudential regulation; Default risk; Capital requirements; Bank bail-in; Macroprudential policies evaluation database; impact of the INTRODUCTION; credit supply; INTRODUCTION of BRRD; balance sheet com position; Debt default; Macroprudential policy; Financial sector; Financial sector stability; Global; Europe; EA country; default probability; default horizon; descriptive statistics; subsamples of euro area (search for similar items in EconPapers)
Pages: 36
Date: 2022-07-15
New Economics Papers: this item is included in nep-ban, nep-cba, nep-fdg, nep-mon and nep-rmg
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.imf.org/external/pubs/cat/longres.aspx?sk=520865 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:imf:imfwpa:2022/141

Ordering information: This working paper can be ordered from
http://www.imf.org/external/pubs/pubs/ord_info.htm

Access Statistics for this paper

More papers in IMF Working Papers from International Monetary Fund International Monetary Fund, Washington, DC USA. Contact information at EDIRC.
Bibliographic data for series maintained by Akshay Modi ().