Countercyclical Liquidity Policy and Credit Cycles: evidence from macroprudential and monetary policy in Brazil

João Barroso, Rodrigo Gonzalez, Jose-Luis Peydro and Bernardus Van Doornik

No 537, Working Papers Series from Central Bank of Brazil, Research Department

Abstract: We analyze how countercyclical liquidity policy – via reserve requirements (RRs) – affects the credit cycle. For identification, we exploit supervisory credit register data and changes in RRs in Brazil motivated by monetary and prudential purposes. Credit supply effects are binding for firms and twice as large when policy is eased during credit crunches – crisis – than when policy is tightened during credit booms. Effects are stronger for larger domestic banks. During crunches, more affected banks increase the supply of credit volume due to policy easing, but increase collateral requirements, while more financially constrained banks retrench. During booms, foreign banks bypass policy tightening.

Date: 2020-10
New Economics Papers: this item is included in nep-ban, nep-fdg, nep-mac and nep-mon
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Related works:
Working Paper: Countercyclical liquidity policy and credit cycles: Evidence from macroprudential and monetary policy in Brazil (2020)
Working Paper: Countercyclical Liquidity Policy and Credit Cycles: Evidence from Macroprudential and Monetary Policy in Brazil (2020)
Working Paper: Countercyclical liquidity policy and credit cycles: Evidence from macroprudential and monetary policy in Brazil (2020)
Working Paper: Countercyclical Liquidity Policy and Credit Cycles: Evidence from Macroprudential and Monetary Policy in Brazil (2019)
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