on the effectiveness of macroprudential measures
Post on 25-May-2022
3 Views
Preview:
TRANSCRIPT
Restricted
On the effectiveness of macroprudential measuresLeonardo Gambacorta (BIS & CEPR)Panel on “Assessing the impact of macroprudential policy” – Banco de Portugal – 8 October, 2019The views expressed in this presentation are those of the author and not necessarily those of the Bank for International Settlements
Restricted 2
Outline
I. Some facts on Macroprudential Policies (MaPs)
II. The impact of MaPs on credit and their interaction with monetary policy: new evidence using credit registry data
III. MaPs and bank risk
IV. What are the effects of MaPs on macroeconomic performance?
V. Conclusions
Leonardo Gambacorta“On the effectiveness of macroprudential measures”
Restricted 3
I. Some facts on MaPs
Leonardo Gambacorta“On the effectiveness of macroprudential measures”
Restricted 4
MaPs activism varies between countries
Number of policy actions
Advanced economies Emerging market economies
The sample covers 1,147 macroprudential policy actions adopted in 64 countries (29 AEs and 35 EMEs). The database is constructed using information in Lim et al (2011, 2013), Kuttner and Shim (2016), and Cerutti et al. (2017b). Data for the pre-crisis period cover the 1990–2007 period, while the post-crisis period refers to 2008–14.
Sources: IMF; BIS; authors’ calculations.
Leonardo Gambacorta“On the effectiveness of macroprudential measures”
Restricted 5
MaPs are used in different ways
Use of macroprudential instruments1
In per cent Graph 2
Type of instrument Type of measure Advanced vs emerging market economies
1 The sample covers the period 1990–2014. Macroprudential tools for resilience include (a) capital-based instruments (countercyclical capital requirements, leverage restrictions, general or dynamic provisioning) and (b) liquidity requirements. Cyclical macroprudential tools include (c) asset-side instruments (credit growth limits, maximum debt service-to-income ratio, limits to banks’ exposures to the housing sector as a maximum loan-to-value ratio); (d) changes in reserve requirements; and (e) currency instruments (variations in limits on foreign currency exchange mismatches and net open positions).
Source: Authors’ calculations.
Leonardo Gambacorta“On the effectiveness of macroprudential measures”
Restricted 6
II. The impact of macroprudential policies and their interaction with monetary policy: new evidence using credit registry data
Leonardo Gambacorta“On the effectiveness of macroprudential measures”
Restricted 7
Main characteristics of the CCA research project
Joint project under the auspices of the Consultative Council for the Americas (CCA): Credit register data for five Latin America countries:
AR, BR, CO, MX, PE (good laboratory) Not possible to pool the data (data highly confidential) Research protocol (same modelling strategy and similar data
definition) Focus on domestic credit. Project wants to complement the
analysis of the IBRN (cross-border spillover of MaPs) Total of 15 episodes analysed:
- 12 tightening vs 3 easing- 6 enhancing resilience vs 9 dampening the cycle
Leonardo Gambacorta“On the effectiveness of macroprudential measures” 7
Restricted 8
Main results
Macroprudential tools are effective in stabilising credit cycles
A tightening in macroprudential policies is associated with a reduction in credit growth of 4.2% after three months and 7.2% after one year
Prudential policies aimed at raising additional buffers through capital requirements or provisioning take more time to manifest their effects
There is evidence from country team papers that lending supply reacts differently for banks with a different level of risk and capitalization
The effectiveness of macroprudential policies on credit growth is affected by monetary policy conditions
Macroprudential tools that acted as a complement to monetary policies (ie pushed in the same direction) were relatively more effective
8Leonardo Gambacorta“On the effectiveness of macroprudential measures”
Restricted 9
Effects of MaPs on credit growth after 3 months are different. MaPs with main aim to improve resilience are less effective
NOTE: Weights are from random effects analysis
Overall (I-squared = 99.7%, p = 0.000)
Argentina 4
Colombia 2 2
Mexico 1 1
Brazil 1
Colombia 1 2
Colombia 2 1
country
Argentina 2
Peru 1
Colombia 1 1
Colombia 3 2
Colombia 3 1
Argentina 1
Argentina 3
-0.02 (-0.05, 0.02)
-0.16 (-0.20, -0.13)
-0.30 (-0.89, 0.30)
0.00 (-0.01, 0.02)
-0.02 (-0.04, 0.00)
0.01 (0.01, 0.02)
-0.13 (-0.26, -0.01)
ES (95% CI)
-0.05 (-0.11, 0.00)
-0.02 (-0.04, -0.01)
0.01 (-0.00, 0.02)
-0.07 (-0.07, -0.07)
-0.05 (-0.07, -0.04)
-0.01 (-0.05, 0.03)
0.45 (0.32, 0.57)
100.00
8.72
0.33
9.34
9.17
9.56
4.34
Weight
7.79
9.39
9.49
9.56
9.43
%
8.49
4.38
-0.02 (-0.05, 0.02)
-0.16 (-0.20, -0.13)
-0.30 (-0.89, 0.30)
0.00 (-0.01, 0.02)
-0.02 (-0.04, 0.00)
0.01 (0.01, 0.02)
-0.13 (-0.26, -0.01)
ES (95% CI)
-0.05 (-0.11, 0.00)
-0.02 (-0.04, -0.01)
0.01 (-0.00, 0.02)
-0.07 (-0.07, -0.07)
-0.05 (-0.07, -0.04)
-0.01 (-0.05, 0.03)
0.45 (0.32, 0.57)
100.00
8.72
0.33
9.34
9.17
9.56
4.34
Weight
7.79
9.39
9.49
9.56
9.43
%
8.49
4.38
0-.892 0 .892
Leonardo Gambacorta“On the effectiveness of macroprudential measures”
Restricted 10
Effects of MaPs on credit growth after one year are quite similar.Also MaPs with main aim to improve resilience are effective
NOTE: Weights are from random effects analysis
Overall (I-squared = 98.2%, p = 0.000)
Colombia 1 2
Argentina 2
Colombia 3 2
Colombia 3 1
country
Argentina 4
Colombia 2 1
Colombia 1 1
Mexico 1 1
Brazil 1
Argentina 3
Peru 1
Colombia 2 2
Argentina 1
-0.10 (-0.14, -0.06)
-0.07 (-0.08, -0.06)
-0.11 (-0.13, -0.09)
-0.14 (-0.15, -0.13)
-0.22 (-0.25, -0.19)
ES (95% CI)
-0.12 (-0.15, -0.10)
-1.10 (-1.46, -0.75)
-0.11 (-0.14, -0.08)
0.01 (-0.04, 0.06)
-0.02 (-0.03, -0.01)
-0.13 (-0.16, -0.10)
-0.01 (-0.02, -0.00)
-1.41 (-3.89, 1.06)
-0.03 (-0.05, -0.01)
100.00
9.29
9.04
9.31
8.89
Weight
8.90
1.00
8.83
8.14
9.25
8.92
9.29
0.02
9.10
%
-0.10 (-0.14, -0.06)
-0.07 (-0.08, -0.06)
-0.11 (-0.13, -0.09)
-0.14 (-0.15, -0.13)
-0.22 (-0.25, -0.19)
ES (95% CI)
-0.12 (-0.15, -0.10)
-1.10 (-1.46, -0.75)
-0.11 (-0.14, -0.08)
0.01 (-0.04, 0.06)
-0.02 (-0.03, -0.01)
-0.13 (-0.16, -0.10)
-0.01 (-0.02, -0.00)
-1.41 (-3.89, 1.06)
-0.03 (-0.05, -0.01)
100.00
9.29
9.04
9.31
8.89
Weight
8.90
1.00
8.83
8.14
9.25
8.92
9.29
0.02
9.10
%
0-3.89 0 3.89
Leonardo Gambacorta“On the effectiveness of macroprudential measures”
Restricted 11
III. Macroprudential policy and bank risk
Leonardo Gambacorta“On the effectiveness of macroprudential measures”
Restricted 12
Cross-sectional dispersion of bank risk measures
Leonardo Gambacorta“On the effectiveness of macroprudential measures”
Restricted
MaPs have asymmetric effects (Altunbas et al, 2018)
Data for 3,177 banks operating in 61 countries
MaPs have a significant impact on bank risk, both those focused on dampening the cycle and those that are specifically designed to enhance banks’ resilience
MaPs are more effective in a tightening than an easing
The responses to changes in MaPs differ among banks: small, weakly capitalised and with a higher share of wholesale funding react more strongly to changes in MaPs
13Leonardo Gambacorta“On the effectiveness of macroprudential measures”
Restricted
Effect of a MaP tightening: well vs low capitalized banks
14
Note: The graph reports the effect on bank risk of a tightening in macroprudential tool. The leftpart indicates the effects on banks’ expected default frequency (left-hand axis), the right partthe effects on the Z-score (right-hand axis).Source: Altunbas, Binici and Gambacorta (2018).
Z-scoreEDF
Leonardo Gambacorta“On the effectiveness of macroprudential measures”
Restricted 15
IV. What are the effects of macroprudential policies on macroeconomic performance?
Leonardo Gambacorta“On the effectiveness of macroprudential measures”
Restricted
Do MaPs affect output growth and volatility? (Boar et al, 2017)
1,140 MaPs in 64 countries (29 AEs vs 35 EMEs)
Panel data analysis on annual data (1990-2014)
Finance and growth model á la Beck and Levine (2004)
GMM to tackle endogeneity issues
On average, we find beneficial effects of MaPs on macroeconomic performance
The effects are reduced when the degree of financial development becomes particularly large (shadow banking)
16Leonardo Gambacorta“On the effectiveness of macroprudential measures”
Restricted 17
Effects of a macroprudential tightening on Growth-at-Risk
Leonardo Gambacorta“On the effectiveness of macroprudential measures”
Response of 0.05th quantile of GDP growth to a policy action and mean response.
Source: Franta and Gambacorta (2019).
Restricted 18
V. Conclusions
Leonardo Gambacorta“On the effectiveness of macroprudential measures”
Restricted
Main takeaways (1)
MaPs have been quite effective in stabilising credit cycles and containing bank risk. The propagation of the effects to credit growth is more rapid (they materialise after one quarter) for policies aimed at curbing the cycle (ie LTV) than for policies aimed at fostering resilience (ie capital based), which take effect within a year
The responses of bank risk and credit to changes in MaPs differ depending on bank-specific characteristics: banks that are small, weakly capitalised and with a higher share of wholesale funding react more strongly to changes in macroprudential tools
19Leonardo Gambacorta“On the effectiveness of macroprudential measures”
Restricted
Main takeaways (2)
MaPs have a greater effect on credit growth when reinforced by the use of monetary policy to push in the same direction
Countries that more frequently used MaPs, other things being equal, experienced stronger and less volatile GDP growth. These effects are influenced by each economy's openness and financial development
MaPs are more effective if embedded in a broader macro-financial stability framework and coordination with other policies
20Leonardo Gambacorta“On the effectiveness of macroprudential measures”
Restricted
References
21
Altunbas, Y, M Binici and L Gambacorta (2018), “Macroprudential policies and bank risk”, Journal of International Money and Finance, 39: 153–185.
Altunbas, Y, M Binici and L Gambacorta and A Murcia (2017), “New evidence on the effectiveness of macroprudential measures ”, VOX article, https://voxeu.org/article/new-evidence-effectiveness-macroprudential-measures.
BIS (2018), “Moving forward with macroprudential frameworks”, Annual Economic Report, June, 63-90.
Boar, C, L Gambacorta, G Lombardo and L Pereira da Silva (2017), “What are the effects of macroprudential policies on macroeconomic performance?”, BIS Quarterly Review, September.
Claessens, S, S Ghosh and R Mihet (2013), “Macro-prudential policies to mitigate financial system vulnerabilities”, Journal of International Money and Finance, 39, 153–85.
Franta, M and L Gambacorta (2019), “On the effects of macroprudential policies on Growth-at-Risk”, mimeo.
Gambacorta, L and A Murcia (2019), “The impact of macroprudential policies and their interaction with monetary policy: an empirical analysis using credit registry data”, Journal of Financial Intermediation, forthcoming.
Leonardo Gambacorta“On the effectiveness of macroprudential measures”
Restricted 22
Thanks for your attention!Leonardo.Gambacorta@bis.org
Leonardo Gambacorta“On the effectiveness of macroprudential measures”
top related