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The effects of macroprudential policy announcements on systemic risk

Author

Listed:
  • Bluwstein, Kristina

    (Bank of England)

  • Patozi, Alba

    (Bank of England)

Abstract

We construct a new data set of macroprudential policy announcements for the United Kingdom and estimate their effect on systemic risk, using a high-frequency identification approach. First, by examining a sample of the largest UK-listed banks, we identify macroprudential policy announcement shocks that were unanticipated by the financial markets. Second, we study the effects of market-based macroprudential policy surprises on systemic risk in a local projection framework. We find that tighter than expected macroprudential policy announcements contribute to a substantial reduction in perceived systemic risk in the short run, with effects persisting for several months. The reduction is mostly attributed to the reaction in equity and bond markets.

Suggested Citation

  • Bluwstein, Kristina & Patozi, Alba, 2024. "The effects of macroprudential policy announcements on systemic risk," Bank of England working papers 1080, Bank of England.
    • Handle: RePEc:boe:boeewp:1080
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    File URL: https://www.bankofengland.co.uk/-/media/boe/files/working-paper/2024/the-effects-of-macroprudential-policy-announcements-on-systemic-risk.pdf
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    More about this item

    Keywords

    Macroprudential policy; systemic risk; high-frequency identification; policy announcements;
    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
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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