The interaction between domestic monetary policy and macroprudential policy in Israel

Jonathan Benchimol, Inon Gamrasni, Michael Kahn, Sigal Ribon, Yossi Saadon, Noam Ben-Ze’ev, Asaf Segal and Yitzchak Shizgal
Additional contact information
Inon Gamrasni: BoI - Bank of Israel
Michael Kahn: BoI - Bank of Israel
Sigal Ribon: BoI - Bank of Israel
Noam Ben-Ze’ev: BoI - Bank of Israel
Asaf Segal: BoI - Bank of Israel
Yitzchak Shizgal: BoI - Bank of Israel

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Abstract: The global financial crisis (GFC) triggered the use of macroprudential policies imposed on the banking sector. Using bank-level panel data for Israel for the period 2004–2019, we find that domestic macroprudential measures changed the composition of bank credit growth but did not affect the total credit growth rate. Specifically, we show that macroprudential measures targeted at the housing sector moderated housing credit growth but tended to increase business credit growth. We also find that accommodative monetary policy surprises tended to increase bank credit growth before the GFC. We show that accommodative monetary policy surprises increased consumer credit when interacting with macroprudential policies targeting the housing market. Accommodative monetary policy interacted with nonhousing macroprudential measures to increase total credit.

Keywords: Financial stability; Policy evaluation; Banking sector; Credit markets; Regulation; Global financial crisis (search for similar items in EconPapers)
Date: 2022-07
Note: View the original document on HAL open archive server: https://hal-emse.ccsd.cnrs.fr/emse-04624972v1
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Published in Economic Modelling, 2022, 112 (105872), pp.1-19. ⟨10.1016/j.econmod.2022.105872⟩

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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 (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:emse-04624972

DOI: 10.1016/j.econmod.2022.105872

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