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Credit supply responses to reserve requirement: loan-level evidence from macroprudential policy

João Barroso (), Rodrigo Barbone Gonzalez and Bernardus F Nazar Van Doornik

No 674, BIS Working Papers from Bank for International Settlements

Abstract: This paper estimates the impact of reserve requirements (RR) on credit supply in Brazil, exploring a large loan-level dataset. We use a difference-in-difference strategy, first in a long panel, then in a cross-section. In the first case, we estimate the average effect on credit supply of several changes in RR from 2008 to 2015 using a macroprudential policy index. In the second, we use the bank-specific regulatory change to estimate credit supply responses from (1) a countercyclical easing policy implemented to alleviate a credit crunch in the aftermath of the 2008 global crisis; and (2) from its related tightening. We find evidence of a lending channel where more liquid banks mitigate RR policy. Exploring the two phases of countercyclical policy, we find that the easing impacted the lending channel on average two times more than the tightening. Foreign and small banks mitigate these effects. Finally, banks are prone to lend less to riskier firms.

Keywords: reserve requirement; credit supply; capital ratio; liquidity ratio; macroprudential policy (search for similar items in EconPapers)
JEL-codes: E51 E52 E58 G21 G28 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban, nep-cba, nep-mac and nep-mon
Date: 2017-11
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3) Track citations by RSS feed

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