Macroprudential policy and its impact on the credit cycle

Selien De Schryder and Frederic Opitz

Journal of Financial Stability, 2021, vol. 53, issue C

Abstract: We identify a novel set of macroprudential policy shocks and estimate their effects on credit cycle variables in a panel of 13 EU countries between 1999 and 2018. We find that a typical macroprudential policy tightening shock reduces bank credit-to-GDP by 2.4% points and household credit-to-GDP by 2.2% points over a period of four years. The non-financial corporations and total credit-to-GDP ratios, however, do not react significantly. Using state-dependent local projections, we further find that the effects on the credit-to-GDP ratios are stronger in credit cycle upturns than in downturns. We also detect a sizable leakage of firm credit from the banking to the non-banking sector next to a shift from household to firm credit.

Keywords: Macroprudential policy; Effectiveness; State dependency; Credit cycle (search for similar items in EconPapers)
JEL-codes: C23 E58 G18 G28 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (21)

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Working Paper: Macroprudential policy and its impact on the Credit Cycle (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finsta:v:53:y:2021:i:c:s1572308920301212

DOI: 10.1016/j.jfs.2020.100818

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