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Macroprudential policy and intra-group dynamics: The effects of reserve requirements in Brazil

Chris Becker, Matias Ossandon Busch () and Lena Tonzer ()

No 21/2017, IWH Discussion Papers from Halle Institute for Economic Research (IWH)

Abstract: We examine whether liquidity dynamics within banking groups matter for the transmission of macroprudential policy. Using matched headquarter-branch data for identification, we find a lending channel of reserve requirements for municipal branches whose headquarters are more exposed to the policy tool. The result is driven by the 2008-2009 crisis and is stronger for state-owned branches, especially when being less profitable and liquidity constrained. These findings suggest the presence of cross-regional distributional effects of macroprudential policies operating via internal capital markets.

Keywords: macroprudential regulation; financial intermediation; intra-group dynamics (search for similar items in EconPapers)
JEL-codes: F30 F65 G21 G28 (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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