Working Paper: NBER ID: w22874
Authors: Claudia M. Buch; Linda Goldberg
Abstract: The development of macroprudential policy tools has been one of the most significant changes in banking regulation in recent years. In this multi-study initiative of the International Banking Research Network, researchers from fifteen central banks and two international organizations use micro-banking data in conjunction with a novel dataset of prudential instruments to study international spillovers of prudential policy changes and their effects on bank lending growth. The collective analysis has three main findings. First, the effects of prudential instruments sometimes spill over borders through bank lending. Second, international spillovers vary across prudential instruments and are heterogeneous across banks. Bank-specific factors like balance sheet conditions and business models drive the amplitude and direction of spillovers to lending growth rates. Third, the effects of international spillovers of prudential policy on loan growth rates have not been large on average. However, our results tend to underestimate the full effect by focusing on adjustment along the intensive margin and by analyzing a period in which relatively few countries implemented country-specific macroprudential policies.
Keywords: macroprudential policy; bank lending; spillovers; prudential instruments
JEL Codes: F34; G01; G21
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Prudential policy changes (G18) | Bank lending growth (G21) |
| International spillovers of prudential instruments (F65) | Bank lending growth (G21) |
| Bank-specific factors (balance sheet conditions, business models) (G21) | International spillovers of prudential instruments (F65) |
| Higher reliance on deposit funding and illiquid assets (G21) | Response to changes in loan-to-value ratio limits and sector-specific capital buffer adjustments (G21) |
| Prudential policies (G18) | Loan growth rates (G21) |
| Prudential policies (G18) | Variations in loan growth rates between advanced and emerging markets (F65) |