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The Impact of Macroprudential Policy Instruments on Financial Stability in Southern Europe

Author

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  • Lorenčič Eva

    (PhD Candidate at the University of Maribor, Faculty of Economics and Business, Slovenia and Expert in Basel Measurement and Reporting at Credit Suisse Group AG, Zürich, Switzerland, eva.lorencic@credit-suisse.com)

  • Festić Mejra

    (University of Maribor, Faculty of Economics and Business, Slovenia)

Abstract

This paper is a contribution to the body of research examining the impact of macroprudential policy instruments on financial stability. The following hypothesis was tested (H1): Macroprudential policy instruments (household borrowing costs; interbank loans as a percentage of total loans; loan to deposit ratio; leverage ratio; and solvency ratio) enhance financial stability, as measured by credit growth, in four southern European economies (Greece, Italy, Portugal and Spain) from Q4 2010 to Q4 2018. The empirical results of this study suggest that, of the investigated macroprudential policy instruments, household borrowing costs, interbank loans as a percentage of total loans and loan to deposit ratio exhibit the predicted impact on credit growth rate. Leverage ratio and solvency ratio do not exhibit the expected impact on the response variable. Moreover, only three out of the five explanatory variables are statistically significant in the model. Consequently, it is not possible to confirm or reject the hypothesis based on the available data and results.

Suggested Citation

  • Lorenčič Eva & Festić Mejra, 2022. "The Impact of Macroprudential Policy Instruments on Financial Stability in Southern Europe," Naše gospodarstvo/Our economy, Sciendo, vol. 68(1), pages 25-34, March.
    • Handle: RePEc:vrs:ngooec:v:68:y:2022:i:1:p:25-34:n:4
    DOI: 10.2478/ngoe-2022-0003
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    References listed on IDEAS

    as
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    5. Mr. Nicolas Arregui & Mr. Jaromir Benes & Mr. Ivo Krznar & Ms. Srobona Mitra & Mr. Andre O Santos, 2013. "Evaluating the Net Benefits of Macroprudential Policy: A Cookbook," IMF Working Papers 2013/167, International Monetary Fund.
    6. Cerutti, Eugenio & Dagher, Jihad & Dell'Ariccia, Giovanni, 2017. "Housing finance and real-estate booms: A cross-country perspective," Journal of Housing Economics, Elsevier, vol. 38(C), pages 1-13.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    macroprudential policy; macroprudential instruments; systemic risk; financial stability;
    All these keywords.

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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