The Interaction Between Domestic Monetary Policy and Macroprudential Policy in Israel

Jonathan Benchimol, Inon Gamrasni (), Kahn Michael (), Sigal Ribon, Yossi Saadon, Ben-Ze'Ev Noam, Segal Asaf and Shizgal Yitzchak
Additional contact information
Kahn Michael: Bank of Israel
Ben-Ze'Ev Noam: Bank of Israel
Segal Asaf: Bank of Israel
Shizgal Yitzchak: Bank of Israel

No 2021.02, Bank of Israel Working Papers from Bank of Israel

Abstract: We examine the impact of domestic macroprudential (MaP) policy measures targeted at the banking sector, alongside the impact of domestic monetary policy on housing, consumer, and business bank credit dynamics, using individual bank panel data for the period 2004–19. We find that domestic MaP measures targeting housing sector credit reduced the growth rate of housing credit and contributed to business credit growth. Other general MaP measures reduced growth of credit to the business sector. Monetary policy was generally found to be effective, with a significant negative impact on bank credit before the Global Financial Crisis (GFC). The interaction between monetary policy and MaP highlights the role of monetary policy after 2008, and the effect of accommodative monetary policy on consumer and business credit fostered by housing MaP measures. We found that the impact of foreign monetary policy on credit growth is negative, as is the impact of domestic monetary policy, suggesting its capacity to function as a leading indicator for domestic monetary policy.

Keywords: financial stability; policy evaluation; banking sector; credit markets; regulation; global financial crisis (search for similar items in EconPapers)
JEL-codes: E51 E52 E58 G01 G21 G28 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2021-02
New Economics Papers: this item is included in nep-ban, nep-cba, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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https://boiwebrepec.azurefd.net/RePEc/boi/wpaper/WP_2021.02.pdf First version, 2021 (application/pdf)

Related works:
Journal Article: The interaction between domestic monetary policy and macroprudential policy in Israel (2022)
Working Paper: The interaction between domestic monetary policy and macroprudential policy in Israel (2022)
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