Macroprudential Policy Spillovers: A Quantitative Analysis
IMF Working Papers, July 24, 2017
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Bibliographic details
- Authors: Heedon Kang, Francis Vitek, Rina Bhattacharya, Phakawa Jeasakul, Sònia Muñoz, Naixi Wang, Rasool Zandvakil
- Published: July 24, 2017
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781484310991.001
Overview
- Authors: Heedon Kang, Francis Vitek, Rina Bhattacharya, Phakawa Jeasakul, Sònia Muñoz, Naixi Wang, Rasool Zandvakil
- Date: July 24, 2017
- Core objective: Analyze cross-border macrofinancial spillovers from a variety of macroprudential policy measures using a range of quantitative methods (event study, panel regression, structural model simulations).
Key empirical findings (event study and panel regressions)
- Liquidity and sectoral macroprudential policy measures often affect cross-border bank credit.
- Capital measures do not affect cross-border bank credit.
- Empirical evidence is stronger for tightening measures than for loosening measures.
- Effects are distributed across credit leakage and reallocation effects.
- Spillovers are generally regionally concentrated.
Structural model simulation results
- Output and bank credit spillovers from sectoral macroprudential policy shocks are generally small worldwide.
- Spillovers are regionally concentrated and economically significant for countries connected by strong trade or financial linkages.
- Countercyclical capital buffer adjustments have the potential to generate sizeable regional spillovers.
Policy implications and interpretation
- Sectoral and liquidity macroprudential measures can transmit cross-border via changes in bank credit, with stronger effects when measures tighten.
- Capital-based macroprudential measures may be less effective in generating cross-border credit spillovers compared with liquidity and sectoral tools.
- Policymakers should consider regional linkages—trade and financial connections—when assessing spillover magnitudes and designing macroprudential measures.
- Countercyclical capital buffer adjustments warrant attention for their potential to generate sizeable regional spillovers and thus for coordination across linked jurisdictions.
Content in this bundle
- Macroprudential Policy Spillovers: A Quantitative Analysis, WP/17/170, July 2017