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Macroprudential Policy Effectiveness: Lessons from Southeastern Europe

Jérôme Vandenbussche (), Piyabha Kongsamut () and Dilyana Dimova
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Jérôme Vandenbussche: International Monetary Fund
Piyabha Kongsamut: International Monetary Fund

Journal of Banking and Financial Economics, 2018, vol. 1, issue 9, 60-102

Abstract: This paper presents a detailed account of the rich set of macroprudential measures (MPPs) implemented in Bulgaria, Croatia, Romania, and Serbia during their synchronized boom and bust cycles in 2002–12, and assesses their effectiveness in managing credit growth. Only strong MPPs helped contain domestic credit growth during the boom years, but circumvention via direct external borrowing offset their effectiveness to a large extent. MPPs taken during the bust had no discernible impact. The paper concludes that (i) proper calibration of MPPs is of the essence; (ii) only strong, broad-based MPPs can contain credit booms; (iii) econometric studies of macroprudential policy effectiveness should focus on concrete policy measures rather than on instruments use; and (iv) in so doing should allow for possible non-linear and state-contingent effects.

Keywords: Macroprudential Policies; Financial Stability; Credit Growth; Southeastern Europe (search for similar items in EconPapers)
JEL-codes: G18 G28 (search for similar items in EconPapers)
Date: 2018
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