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On the empirics of reserve requirements and economic growth

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  • Crespo Cuaresma, Jesus
  • von Schweinitz, Gregor
  • Wendt, Katharina

Abstract

Reserve requirements, as a tool of macroprudential policy, have been increasingly employed since the outbreak of the great financial crisis. We conduct an analysis of the effect of reserve requirements in tranquil and crisis times on long-run growth rates of GDP per capita and credit (%GDP) making use of Bayesian model averaging methods. Regulation has on average a negative effect on GDP in tranquil times, which is only partly offset by a positive (but not robust effect) in crisis times. Credit over GDP is positively affected by higher requirements in the longer run.

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  • Crespo Cuaresma, Jesus & von Schweinitz, Gregor & Wendt, Katharina, 2019. "On the empirics of reserve requirements and economic growth," Journal of Macroeconomics, Elsevier, vol. 60(C), pages 253-274.
    • Handle: RePEc:eee:jmacro:v:60:y:2019:i:c:p:253-274
    DOI: 10.1016/j.jmacro.2019.03.004
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    1. Glocker, Christian, 2019. "Do reserve requirements reduce the risk of bank failure?," MPRA Paper 95634, University Library of Munich, Germany.

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    More about this item

    Keywords

    Reserve requirements; Macroprudential policy; Credit growth; Economic growth; Bayesian model averaging;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General

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