Macroprudential Policy and Bank Systemic Risk: Does Inflation Targeting Matter?

Farah Mugrabi, Mohamed Belkhir, Sami Naceur, Bertrand Candelon and Woon Gyu Choi
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Farah Mugrabi: Université catholique de Louvain, LIDAM/LFIN, Belgium
Mohamed Belkhir: International Monetary Fund
Sami Naceur: International Monetary Fund
Bertrand Candelon: Université catholique de Louvain, LIDAM/LFIN, Belgium

No 2025015, LIDAM Reprints LFIN from Université catholique de Louvain, Louvain Finance (LFIN)

Abstract: This paper examines whether inflation targeting (IT) enhances the effectiveness of macroprudential policies in reducing banks’ contribution to systemic risk measured by SRISK. Using bank-level data for 47 countries, our regime-dependent panel regressions suggest that tools such as DSTI limits, the CCyB, conservation buffers, and leverage limits are relatively more effective under IT. Loan restrictions appear less effective, while loan-to-value (LTV) caps show impact only in post-GFC samples. Liquidity and reserve requirements reduce SRISK under IT in higher-frequency estimations. Our findings lend credence to the view that IT strengthens the role of macroprudential policy in mitigating financial stability risks.

Keywords: Macroprudential Policies; Banks; Systemic Risk; Monetary Policy; Inflation Targeting (search for similar items in EconPapers)
JEL-codes: C33 G01 G18 (search for similar items in EconPapers)
Pages: 77
Date: 2025-10-31
Note: In: Emerging Markets Review, 2025
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Related works:
Journal Article: Macroprudential policy and bank systemic risk: Does inflation targeting matter? (2026)
Working Paper: Macroprudential Policy and Bank Systemic Risk: Does Inflation Targeting Matter? (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:ajf:louvlr:2025015

DOI: 10.1016/j.ememar.2025.101397

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