EconPapers    
Economics at your fingertips  
 

Effectiveness and channels of macroprudential policies: lessons from the Euro area

Yuanyan Zhang and Thierry Tressel ()

Journal of Financial Regulation and Compliance, 2017, vol. 25, issue 3, 271-306

Abstract: Purpose - The design of a macro-prudential framework and its interaction with monetary policy has been at the forefront of the policy agenda since the global financial crisis. However, most advanced economies (AEs) have little experience using macroprudential policies. As a result, relatively little is known empirically about macroprudential instruments’ effectiveness in mitigating systemic risks in these countries, about their channels of transmission, and about how these instruments would interact with monetary policy. This paper aims to fill in the gap. Design/methodology/approach - The authors develop a new approach using the euro area bank lending survey to assess the effectiveness of macro-prudential policies in containing credit growth and house price appreciation in mortgage markets. Estimation is performed under the panel regressions (OLS, GLS) and panel VAR setup. Endogeneity issues arising from measures of macro-prudential policies are addressed by introducing GMM estimation and various instruments. Findings - The authors find instruments targeting the cost of bank capital most effective in slowing down mortgage credit growth, and that the impact is transmitted mainly through price margins, the same banking channel as monetary policy. Limits on loan-to-value ratios are also effective, especially when monetary policy is excessively loose. Originality/value - With limited data on macroprudential policy measures in the AEs, this paper proposed a new methodology of using answers from bank lending survey as proxies to assess the effectiveness of specific macroprudential measures and their transmission channels.

Keywords: E32; E4; E5; G01; G21 (search for similar items in EconPapers)
Date: 2017
References: Add references at CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)
http://www.emeraldinsight.com/10.1108/JFRC-10-2016 ... RePEc&WT.mc_id=RePEc (text/html)
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eme:jfrcpp:jfrc-10-2016-0094

Ordering information: This journal article can be ordered from
Emerald Group Publishing, Howard House, Wagon Lane, Bingley, BD16 1WA, UK
http://emeraldgroupp ... journals.htm?id=jfrc

Access Statistics for this article

Journal of Financial Regulation and Compliance is currently edited by Professor Kevin Keasey

More articles in Journal of Financial Regulation and Compliance from Emerald Group Publishing
Bibliographic data for series maintained by Virginia Chapman ().

 
Page updated 2020-06-20
Handle: RePEc:eme:jfrcpp:jfrc-10-2016-0094