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

By Janko Cizel, Jon Frost, Aerdt G. F. J. Houben, Peter Wierts

April 21, 2016

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Janko Cizel, Jon Frost, Aerdt G. F. J. Houben, and Peter Wierts. Effective Macroprudential Policy: Cross-Sector Substitution from Price and Quantity Measures, (USA: International Monetary Fund, 2016) accessed December 22, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

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.

Subject: Bank credit, Banking, Credit, Financial institutions, Financial sector policy and analysis, Macroprudential policy, Macroprudential policy instruments, Money, Mutual funds

Keywords: Bank credit, Credit, Credit flow, Credit growth, Financial cycle, Financial supervision, Global, Investment funds, Macroprudential policy, Macroprudential policy instruments, Macroprudential regulation, Mutual funds, Nonbank credit, Nonbank credit Flow, Nonbank intermediation, Shadow banking, WP

Publication Details

Pages:

47
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2016/094
Stock No:

WPIEA2016094
ISBN:

9781484337738
ISSN:

1018-5941

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