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In the aftermath of the 2008 financial crisis, macroprudential measures were labelled as policymakers’ best response to systemic risk and macro-financial imbalances, with their effectiveness still largely unknown due to limited use of such measures. The purpose of this paper is to clarify the potentials and limitations of these measures by evaluati...
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... was additionally boosted by global developments characterized by financial liberalization, convergence process of emerging markets, high global liquidity and low risk aversion. In order to address these issues, different measures were implemented, but those used the most frequently were related to limits to credit growth and volume ( Figure 3). The most important pre-crisis measures were the high level of the general reserve requirement, administrative restriction of loan growth, introduction of marginal reserve requirements, special reserve requirement and minimum required foreign currency claims. ...
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... Another comparable study is that of Bambulović and Valdec (2020) who investigate the impact of macroprudential policy measures on foreign and domestic banks' lending in Croatia over a 19-year period split into the period before the 2008 financial crisis and after it. The study concludes that macroprudential policies were relatively successful in containing credit growth and constraining the build-up of risks for banks in foreign ownership. ...
In this paper, we investigate the impact of macroprudential policy measures (bundled together into a macroprudential policy index, MPI) on the non-financial corporate sector credit and household credit growth using a one-step system GMM empirical research method. The goal of our paper is to test whether contractionary macroprudential policy stymies credit growth rate and whether expansionary macroprudential policy spurs credit growth rate in selected Euro Area economies (Austria, Belgium, Finland, Germany, Ireland, Italy, Netherlands, Slovenia, and Spain) over the period 2008Q4–2018Q4. We test two hypotheses: H1: The tightening of macroprudential policy measures reduces the non-financial corporate sector credit growth rate, and H2: The tightening of macroprudential policy measures reduces the growth rate of household credit. Based on our empirical results, we can confirm the first hypothesis. In contrast, the second hypothesis can be neither confirmed nor rejected since the explanatory variable of interest (MPI) is statistically insignificant in the second model.
... In this period, the macroprudential policy was loosening for the most part, as CNB was lowering the minimum required amount of foreign currency claims and was lowering reserve requirement rates so that the released funds would be utilized for economic recovery. Bambulović and Valdec (2020) found that domestic and foreign banks increased lending activity after the loosening measures. However, as Dumičić (2015a) pointed out, the recovery was prolonged due to a lack of structural reforms and a deterioration of fiscal indicators. ...
This research focuses on the prediction of the probability of (re)entering high financial stress (via a large set of cyclical risk accumulation indicators). The focus is placed on a specific single-country analysis to obtain answers to questions about which indicators are best in explaining the future probability of (re)entering a high-stress regime. This allows the policymaker to get a better focus on the best-performing variables. It is challenging to monitor a whole set of indicators of cyclical risk build-up; the results could bring into focus a smaller group of the essential variables. The contribution of this paper is in finding a set of indicators that help in forecasting financial stress, in terms of switching from one regime to another. The regime-switching models’ results indicate that some credit specifications, house price dynamics, and debt burden could be best monitored for the case of Croatian data.
... The combination of time series and cross-section observations results in less collinearity among variables, more variability, more degrees of freedom, more efficiency, and more informative data. Panel regression is used in several studies by, for instance, Gambacorta and Murcia (2020), Akinci and Olmstead-Rumsey (2018), Ercegovac, Klinac and Zdrilić (2020), Valdivia Coria and Valdivia Coria (2019), and Bambulović and Valdec (2020). ...
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.
This chapter analyzes the dynamic spillover of shocks between selected macroeconomic and financial variables in the case of a small open economy. To evaluate the effects of macroprudential policy, alongside its interaction with the fiscal and monetary policy, a spillover methodology approach was made as an extension to the VAR (vector autoregression) modeling. Such methodology enables the researcher and policymakers a dynamic approach of modeling, with detailed insights into the sources of time-varying variability of variable interconnection. Based on quarterly data from 4Q 1995 to 4Q 2021 for the case of Croatia, this chapter analyzes the interactions and shock spillovers between the financial stress, credit, real activity, inflation, macroprudential and fiscal policy, with exogenous variables of the Eurozone monetary policy and its real activity. The approach of this study enables macroprudential policymakers to make decisions promptly, and the decisions could be adjusted based on the interactions between the financial system and the real economy. Furthermore, as findings indicate that macroprudential, monetary, and fiscal policies are not isolated, their interactions and transmission channels affect individual policy effectiveness and spillover from one goal to the other. Therefore, future tailoring of all policies needs to be based on such findings and trying to achieve complementarity with them. Although this is a difficult task, just admitting that such interactions exist eases the later modeling and fine-tuning of all instruments.
This paper aims to evaluate the factors determining countries’ private credit level as well as to identify the differences of their effect during the periods when the levels of country private credit exceeded 100 percent of GDP or were below. The research methodology relies on two modifications of the multiple regression model with log differences of variables. Research results showed a negative impact of economic growth and a positive impact of consumer prices and housing prices on the level of private credit. It has also been found that in the first period when the level of private credit to GDP exceeds the 100 per cent threshold households tend to borrow more than in other periods. In the second model distinguishing between periods when the level of country’s private credit was below 100 per cent of GDP and when this level was reached or exceeded the research showed that the effects of economic growth do not differ between periods of high and low indebtedness, but the difference becomes apparent when assessing the impact of household income and expenditure, thus confirming the impact of the marginal financial depth.
