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Macroprudential Policy and Aggregate Demand

Author

Listed:
  • André Teixeira

    (ISEG, REM/UECE, Universidade de Lisboa)

  • Zoë Venter

    (Católica Lisbon School of Business and Economics)

Abstract

This paper assesses the impact of macroprudential policy (MaPP) on aggregate demand in the EU between 2000 and 2019. Using a difference-in-differences approach, we find that MaPP reduces household consumption and increases firm investment. These effects are relatively mild in the short run but become more pronounced in the long run. Our findings point to a weaker macroeconomic impact than suggested in previous studies.

Suggested Citation

  • André Teixeira & Zoë Venter, 2023. "Macroprudential Policy and Aggregate Demand," International Journal of Central Banking, International Journal of Central Banking, vol. 19(4), pages 1-40, October.
    • Handle: RePEc:ijc:ijcjou:y:2023:q:4:a:1
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    References listed on IDEAS

    as
    1. Kuttner, Kenneth N. & Shim, Ilhyock, 2016. "Can non-interest rate policies stabilize housing markets? Evidence from a panel of 57 economies," Journal of Financial Stability, Elsevier, vol. 26(C), pages 31-44.
    2. M. Hashem Pesaran, 2007. "A simple panel unit root test in the presence of cross-section dependence," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 22(2), pages 265-312.
    3. Claudio Borio & Ilhyock Shim, 2007. "What can (macro-)prudential policy do to support monetary policy?," BIS Working Papers 242, Bank for International Settlements.
    4. International Monetary Fund, 2011. "Macroprudential Policy: What Instruments and How to Use them? Lessons From Country Experiences," IMF Working Papers 2011/238, International Monetary Fund.
    5. repec:bla:obuest:v:61:y:1999:i:0:p:631-52 is not listed on IDEAS
    6. G. S. Maddala & Shaowen Wu, 1999. "A Comparative Study of Unit Root Tests with Panel Data and a New Simple Test," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(S1), pages 631-652, November.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Madeira, Carlos, 2024. "The impact of macroprudential policies on industrial growth," Journal of International Money and Finance, Elsevier, vol. 145(C).
    2. Álvaro Robério de Souza Sá & Danyelle Karine Santos Branco, 2024. "Social fund and infant mortality: Evidence from an anti‐poverty policy in Northeast Brazil," Health Economics, John Wiley & Sons, Ltd., vol. 33(4), pages 674-695, April.
    3. Wildmer Daniel Gregori & Ângelo Ramos, 2024. "Time-varying effects of monetary and macroprudential policies: does high inflation matter?," Working Papers w202401, Banco de Portugal, Economics and Research Department.
    4. Teixeira, André, 2023. "Does macroprudential policy affect wealth inequality? Evidence from synthetic controls," Journal of Financial Stability, Elsevier, vol. 67(C).

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    More about this item

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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