Global Financial Cycle, Household Credit, and Macroprudential Policies

Mircea Epure, Irina Mihai (), Camelia Minoiu () and Jose-Luis Peydro
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Irina Mihai: Bucharest University of Economic Studies, Bucharest 010374, Romania; National Bank of Romania, Bucharest 030031, Romania
Camelia Minoiu: Federal Reserve Bank of Atlanta, Atlanta, Georgia 30309

Management Science, 2024, vol. 70, issue 11, 8096-8115

Abstract: We show that macroprudential policies dampen the impact of global financial conditions on local bank credit cycles. For identification, we exploit variation in the U.S. volatility index (VIX) and household and business credit registers in an emerging market economy in which banks depend on foreign funding and macroprudential measures vary over the full cycle. Our results suggest that when the VIX is low, tighter macroprudential policies reduce household lending, notably for riskier (foreign currency (FX) and high debt-service-to-income) loans and by banks dependent on foreign funding. Moreover, they increase (less regulated) local currency lending to real estate firms. Such periods are associated with less subsequent total lending to households and firms and with a lower share of FX loans at the local level. Consistently, when the VIX is low, tighter macroprudential policies dampen house prices and economic activity.

Keywords: macroprudential policies; global financial cycle; boom–bust credit cycle; household and business credit; foreign funding; banks (search for similar items in EconPapers)
Date: 2024
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http://dx.doi.org/10.1287/mnsc.2024.4981 (application/pdf)

Related works:
Working Paper: Global financial cycle, household credit, and macroprudential policies (2023)
Working Paper: Global Financial Cycle, Household Credit, and Macroprudential Policies (2017)
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