Comparison of advanced economies’ performance in bubbles mitigation

Emilio Gallego Neira and Carlos Martínez de Ibarreta

Journal of Financial Regulation and Compliance, 2019, vol. 27, issue 4, 397-421

Abstract: Purpose - This paper aims to analyze the effectiveness of macroprudential and fiscal policies taken from a sample of ten advanced economies in relation to the mitigation of real-estate and credit bubbles by comparing their performance. Design/methodology/approach - This comparison is elaborated with a seemingly unrelated regression methodology, which allows the assessment of individual countries’ performance and improves the estimation of the dependent variables versus an individual regression. Findings - The analysis concludes that countercyclical measures have been more effective to control the growth of household debt. Furthermore, this study validates that macroprudential measures focused on the residential sector meet their objective of controlling the growth of house prices, whereas those macroprudential measures with more generic targets are effective to control the growth of household debt. Originality/value - As opposed to previous panel-regression studies, which have analyzed the performance of macroprudential and fiscal measures in generic terms, this paper compares the performance of these tools in ten advanced economies. Based on the analysis performed, several recommendations are derived for policymakers.

Keywords: Systemic risk; Credit bubbles; Countercyclicality; Fiscal measures; Macroprudential measures; Real-estate bubbles; E58; R31 (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jfrcpp:jfrc-06-2018-0088

DOI: 10.1108/JFRC-06-2018-0088

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