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Monetary and Macroprudential Policies: Empirical Evidences from Panel-VAR

Fernando da Silva Vinhado () and Jose Angelo Divino ()
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Fernando da Silva Vinhado: Graduate Program in Economics of the Catholic University of Brasilia (UCB) and Banco do Brasil.

Brazilian Review of Finance, 2015, vol. 13, issue 4, 691-731

Abstract: The objective of this paper is to investigate the relationship between monetary and macroprudential policies and the banking sector of the Brazilian economy, exploiting its cross-section structure as a source of interrelations between systemic aspects of those policies and the behavior of banks. Impulse-response functions are computed from the estimation of panel-VAR for 56 institutions that were active in the Brazilian banking sector between 2001 and 2013. Among the results, we can highlight the influence of monetary and macroprudential policies on levels of exposure to financial risk, capital and financial stability of banks. There is a complementarity between the instruments of those policies and the stabilization of inflation. The relationships involving banking metrics reveal preference for liquidity in contexts of higher risks, evidence of a competitive banking structure, and formation of capital buffer that lead to financial stability. This confirms the importance of capital requirements as a tool to maintain a stable financial system.

Keywords: monetary policy; macroprudential policy; banks; Panel-VAR. (search for similar items in EconPapers)
JEL-codes: E44 G21 G28 (search for similar items in EconPapers)
Date: 2015
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