Macroprudential Policy and Bank Systemic Risk: Does Inflation Targeting Matter?

By Mohamed Belkhir, Sami Ben Naceur, Bertrand Candelon, Woon Gyu Choi, Farah Mugrabi

June 2, 2023

Preview Citation

Format: Chicago

Mohamed Belkhir, Sami Ben Naceur, Bertrand Candelon, Woon Gyu Choi, and Farah Mugrabi. Macroprudential Policy and Bank Systemic Risk: Does Inflation Targeting Matter?, (USA: International Monetary Fund, 2023) accessed December 22, 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

This paper investigates macroprudential policy effects on bank systemic risk and the role of inflation targeting in such effects. Using bank-level data for 45 countries comprising various monetary and exchange rate regimes, our regime-dependent dynamic panel regression results point to complementarities between monetary and macroprudential policies. We find that the tightening of most macroprudential tools—including DSTI and LTV limits, and capital requirements—reduces bank systemic risk further under inflation targeting. Our findings lend credence to the view that inflation targeting strengthens macroprudential policy roles in mitigating financial stability risks.

Subject: Countercyclical capital buffers, Financial regulation and supervision, Financial sector policy and analysis, Financial sector stability, Macroprudential policy, Macroprudential policy instruments, Systemic risk

Keywords: B data, Banks, Capital requirement, Countercyclical capital buffers, Emerging market economy, Financial sector stability, Global, Inflation Targeting, Inflation targeting matter, IT country, Macroprudential Policies, Macroprudential policy, Macroprudential policy instruments, Monetary Policy, Role of inflation targeting, Systemic Risk

Publication Details

Pages:

46
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2023/119
Stock No:

WPIEA2023119
ISBN:

9798400245008
ISSN:

1018-5941

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