Macro-Prudential Policy and Bank Systemic Risk: Cross-Country Evidence Based on Emerging and Advanced Economies

Ye Zhou and Juejin Chen

Emerging Markets Finance and Trade, 2024, vol. 60, issue 5, 1035-1047

Abstract: This study examines the effects of macro-prudential policy on bank systemic risk by using a cross-country panel data of 65 economies. We find that: (1) macro-prudential policy mitigates bank systemic risk by decreasing the individual risk of banks and systemic linkage between banks; (2) the effect is stronger for banks with larger sizes, wider geographical regions of operation, and more diversified business services; (3) the effect is stronger in countries with less-developed or less-open financial systems, more concentrated banking industries, and emerging economies; (4) the policy-risk relationship is stronger when credit is more crunched, monetary policy is looser, a financial crisis occurs, or after the subprime crisis.

Date: 2024
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DOI: 10.1080/1540496X.2023.2266114

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