Macroprudential policy, monetary policy and Eurozone bank risk

Elien Meuleman and Rudi Vander Vennet

Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium from Ghent University, Faculty of Economics and Business Administration

Abstract: We investigate the impact of macroprudential policy on the risk and return profile of Eurozone banks between 2008 and 2018, conditioning on the stance of monetary policy. Using local projections, we find that a tightening in macroprudential policy increases financial stability by curbing credit growth and increasing the resilience of the banks. With respect to the policy mix, we show that tight macroprudential and monetary policies reinforce each other. But even when monetary policy is accommodating, macroprudential policy is found to be effective in deterring excessive bank risk taking. However, we also document adverse consequences for bank franchise values.

Keywords: Euro Area banks; macroprudential policy; monetary policy; inverse propensity score matching; local projections; bank risk profile (search for similar items in EconPapers)
JEL-codes: C23 E52 E61 G21 G28 (search for similar items in EconPapers)
Pages: 53 pages
Date: 2020-08
New Economics Papers: this item is included in nep-ban, nep-cba, nep-eec and nep-mac
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http://wps-feb.ugent.be/Papers/wp_20_1004.pdf (application/pdf)

Related works:
Journal Article: Macroprudential Policy, Monetary Policy, and Euro Zone Bank Risk (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:rug:rugwps:20/1004

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