Macroprudential Policies, Economic Growth, and Banking Crises

By Mohamed Belkhir, Sami Ben Naceur, Bertrand Candelon, Jean-Charles Wijnandts

May 22, 2020

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Mohamed Belkhir, Sami Ben Naceur, Bertrand Candelon, and Jean-Charles Wijnandts. Macroprudential Policies, Economic Growth, and Banking Crises, (USA: International Monetary Fund, 2020) accessed November 21, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

Using a sample that covers more than 100 countries over the 2000-2017 period, we assess the impact of macroprudential policies on financial stability. In particular, we examine whether the activation of macroprudential policies is conducive to a lower incidence of systemic banking crises. Our empirical setup is designed to account for the potential direct and indirect effects that macroprudential policies can have on banking crises. We find that while macro-prudential policies exert a direct stabilizing effect, they also have an indirect destabilizing effect, which works through the depressing of economic growth. A Generalized Impulse Response Function analysis of a dynamic system composed of the probability of a banking crisis and economic growth reveals, however, that macroprudential policies have a positive net effect on financial stability (lower likelihood of systemic banking crises).

Subject: Banking crises, Emerging and frontier financial markets, Financial crises, Financial markets, Financial sector policy and analysis, Macroprudential policy, Systemic crises

Keywords: Aggregate mpi, Banking crises, Banking crisis database, Countercyclical policy tool, Crisis index, Crisis probability, Economic Growth, Emerging and frontier financial markets, Global, Macroprudential Policies, Macroprudential policy, Macropru-dential policy, Macroprudential policy, Macropudential policy, Policy, Policy instrument, Policy tightening, Policy tool, Prudential policy, Systemic crises, Tools lead, WP

Publication Details

Pages:

54
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2020/065
Stock No:

WPIEA2020065
ISBN:

9781513536989
ISSN:

1018-5941

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