Macro-prudential regulations and systemic risk: the role of country-level governance indicators

Muhammad Suhail Rizwan (), Anum Qureshi () and Irfan Ullah Sahibzada ()
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Muhammad Suhail Rizwan: College of Banking and Financial Studies
Anum Qureshi: Institute of Business Administration (IBA)
Irfan Ullah Sahibzada: University of Winchester

Journal of Banking Regulation, 2024, vol. 25, issue 3, No 6, 305-325

Abstract: Abstract This paper empirically examines the moderating role of country-level governance indicators (CGIs) in the relationship between macro-prudential policy instruments (MPI) and systemic risk. Results from 68 countries, during the period 2000–2017, show that CGIs in terms of corruption controls, government effectiveness, regulatory quality, and rule of law play a negative moderating role in the MPI-systemic risk nexus. Countries scoring high (low) on these CGIs experience stability benefits (instability costs) from MPIs. These findings suggest that the mere implementation of macro-prudential regulations may not perform the intended function of systemic stability. Overall, institutional development in a country’s governance ecosystem is necessary; hence, a coordinated effort is required from all the stakeholders of the country.

Keywords: Systemic risk; Macro-prudential regulations; Country-level governance indicators; Structural stability (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (3)

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DOI: 10.1057/s41261-023-00231-w

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