Macroprudential, Monetary Policy Synergies and Credit Supply: evidence from matched bank-firm loan-level data in Brazil

Rodrigo Gonzalez, Bernardus Doornik and João Barroso

No 607, Working Papers Series from Central Bank of Brazil, Research Department

Abstract: This paper estimates the impact of countercyclical reserve requirements (RRs) on credit. We explore differential bank exposure to RRs in matched bank-firm loan-level data from Brazil, where RRs have been used extensively to pursue financial stability. We find that, after tightening RRs, more exposed banks reduce credit to firms; after loosening, they expand credit supply. During booms, private domestic banks with lower capital adequacy are more responsive to a tightening of RRs and to a simultaneous tightening of the short-term policy rate. We also find that higher levels of economic policy uncertainty weaken this channel, and real effects in employment are modest

Date: 2024-11
New Economics Papers: this item is included in nep-cba, nep-fdg and nep-mon
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