Effective Macroprudential Policy: Cross-Sector Substitution from Price and Quantity Measures

Janko Cizel, Jon Frost, Aerdt Houben and Peter Wierts

No 2016/094, IMF Working Papers from International Monetary Fund

Abstract: Macroprudential policy is increasingly being implemented worldwide. Its effectiveness in influencing bank credit and its substitution effects beyond banking have been a key subject of discussion. Our empirical analysis confirms the expected effects of macroprudential policies on bank credit, both for advanced economies and emerging market economies. Yet we also find evidence of substitution effects towards nonbank credit, especially in advanced economies, reducing the policies’ effect on total credit. Quantity restrictions are particularly potent in constraining bank credit but also cause the strongest substitution effects. Policy implications indicate a need to extend macroprudential policy beyond banking, especially in advanced economies.

Keywords: WP; credit flow; investment funds; Financial cycle; macroprudential regulation; financial supervision; shadow banking; nonbank credit; credit growth; nonbank intermediation; nonbank credit Flow; Credit; Bank credit; Macroprudential policy; Macroprudential policy instruments; Mutual funds; Global (search for similar items in EconPapers)
Pages: 47
Date: 2016-04-21
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Citations: View citations in EconPapers (54)

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Journal Article: Effective Macroprudential Policy: Cross‐Sector Substitution from Price and Quantity Measures (2019)
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