Template-Type: ReDIF-Paper 1.0
Author-Name: Soyoung Kim
Author-X-Name-First: Soyoung
Author-X-Name-Last: Kim
Author-Name: Aaron Mehrotra
Author-X-Name-First: Aaron
Author-X-Name-Last: Mehrotra
Title: Examining macroprudential policy and its macroeconomic effects - some new evidence
Abstract: In this paper, we provide empirical evidence about the broader macroeconomic effects of macroprudential policies and the underlying transmission mechanism, as well as the response of macroprudential policy to financial risks. To this end, we use structural panel vector autoregressions and a dataset covering 32 advanced and emerging economies. We show that macroprudential policy shocks have effects on real GDP, the price level and credit that are very similar to those of monetary policy shocks, but the detailed transmission of the two policies is different. Whereas macroprudential policy shocks mostly affect residential investment and household credit, monetary policy shocks have more widespread effects on the economy. Moreover, while positive credit shocks are generally met with tighter macroprudential policy, macro-financial country characteristics such as the exchange rate regime and the level of financial development affect the policy response.
Length: 37 pages
Creation-Date: 2019-12
File-URL: https://www.bis.org/publ/work825.pdf
File-Format: Application/pdf
File-Function: Full PDF document
File-URL: https://www.bis.org/publ/work825.htm
File-Format: text/html
Number: 825
Classification-JEL: E58, E61, G28
Keywords: macroprudential policy, monetary policy, credit, macroeconomic effect, macroprudential policy response
Handle: RePEc:bis:biswps:825