The Use and Effectiveness of Macroprudential Policies: New Evidence

By Eugenio Cerutti, Stijn Claessens, Luc Laeven. Social Science Research Network, 2015

1,050 citations recorded by the source corpus.

Using a recent IMF survey and expanding on previous studies, we document the use of macroprudential policies for 119 countries over the 2000–2013 period, covering many instruments. Emerging economies use macroprudential policies most frequently; especially foreign exchange related ones while advanced countries use borrower-based policies more. Usage is generally associated with lower growth in credit, notably in household credit. Effects are less in financially more developed and open economies, however, and usage comes with greater cross-border borrowing, suggesting some avoidance. And while macroprudential policies can help manage financial cycles, they work less well in busts.

Subfields: Economics and Econometrics, Finance, Information Systems

View Paper: https://www.semanticscholar.org/paper/c89ae1a87d66b678241a11a4c6897266c82aa736

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Citations in the corpus

Bank Capital Redux: Solvency, Liquidity, and Crisis (2017, positive): “Like Cerutti et al. (2015), we find that macroprudential policy, in the form of higher capital ratios, can lower the costs of a financial crisis even if it cannot prevent it.”
Economic uncertainty and bank risk: Evidence from emerging economies (2020, neutral): “…association varies with these bank features. requirements.51 Having identified the direction of policy changes, i.e. tightening or loosening, Cerutti et al. (2017a) propose a dummy-type indicator for overall macroprudential policies by setting its value at 1 (-1) if the number of tightening…”
Business, Housing and Credit Cycles (2018, background): “…18 OECD countries showing that homeownership rates are more important for explaining cross-country differences than financing conditions (see also Cerutti et al. (2015).9 Third, estimating the GDP cycle jointly with financial series in a multivariate context emphasises a medium-term component in…”
The de-financialization of housing: towards a research agenda (2020, background): “Cerutti et al. (2017) have shown how ‘macroprudential policies’ following the crisis have already restrained the credit supply with certain mortgage restrictions and other preventive measures.”
Fostering green investments and tackling climate-related financial risks: Which role for macroprudential policies? (2019, background): “Their use is reported to have increased after the global financial crisis (Budnik and Kleibl, 2018), while the literature on its actual activation is scarce (BCBS, 2018) and there is a lack of evidence about its effectiveness (Cerutti et al., 2017; BCBS, 2017).”
The benefits are at the tail: Uncovering the impact of macroprudential policy on growth-at-risk (2020, methodology): “In this regard, Cerutti et al. (2017) propose a way to compute a macroprudential policy index (MPI) for a large sample of countries.”
Macroprudential policy and bank risk (2018, methodology): “The higher effectiveness of tightening measures when bank-specific interactions are considered is in line with Claessens et al (2013), Cerutti et al (2017) and McDonald (2015).”