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Effectiveness of macroprudential policies: Do stringent bank regulation and supervision matter?

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  • Mirzaei, Ali
  • Samet, Anis

Abstract

In this paper, we examine the effectiveness of macroprudential policies in limiting credit growth conditional on the quality of bank regulation and supervision. Using a large panel data set of 4109 banks from 91 countries over the period 2001–2013, we find that the efficacy of macroprudential measures is more pronounced in countries with stricter bank supervisory power and more private monitoring. This result is robust to a battery of sensitivity tests. Our additional analysis reveals that adopted macroprudential tools limit more the credit growth of small, less-capitalized, and less-liquid banks when accompanied with stringent bank regulation. In particular, low-capital and low-liquid banks reduce their loans more than their high-capital and high-liquid counterparts, following the activation of macroprudential measures. Overall, our findings imply that the quality of bank regulation and supervision conditions the effectiveness of macroprudential measures.

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  • Mirzaei, Ali & Samet, Anis, 2022. "Effectiveness of macroprudential policies: Do stringent bank regulation and supervision matter?," International Review of Economics & Finance, Elsevier, vol. 80(C), pages 342-360.
    • Handle: RePEc:eee:reveco:v:80:y:2022:i:c:p:342-360
    DOI: 10.1016/j.iref.2022.02.037
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    More about this item

    Keywords

    Bank regulation; Bank supervision; Bank private monitoring; Macroprudential policies; Loan growth;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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