Leakages From Macroprudential Regulations The Case Of Household Specific Tools And Corporate Credit
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Leakages from Macroprudential Regulations The Case of Household Specific Tools and Corporate Credit
Author | : International Monetary Fund |
Publsiher | : International Monetary Fund |
Total Pages | : 35 |
Release | : 2021-04-29 |
Genre | : Business & Economics |
ISBN | : 9781513573731 |
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Sector-specific macroprudential regulations increase the riskiness of credit to other sectors. Using firm-level data, this paper computed the measures of the riskiness of corporate credit allocation for 29 advanced and emerging economies. Consistently across these measures, the paper finds that during credit expansions, an unexpected tightening of household-specific macroprudential tools is followed by a rise in riskier corporate lending. Quantitatively, such unexpected tightening during a period of rapid credit growth increases the riskiness of corporate credit by around 10 percent of the historical standard deviation. This result supports early policy interventions when credit vulnerabilities are still low, since sectoral leakages will be less important at this stage. Further evidence from bank lending standards surveys suggests that the leakage effects are stronger for larger firms compared to SMEs, consistent with recent evidence on the use of personal real estate as loan collateral by small firms.
Staff Guidance Note on Macroprudential Policy
Author | : International Monetary Fund |
Publsiher | : International Monetary Fund |
Total Pages | : 45 |
Release | : 2014-06-11 |
Genre | : Business & Economics |
ISBN | : 9781498342629 |
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This note provides guidance to facilitate the staff’s advice on macroprudential policy in Fund surveillance. It elaborates on the principles set out in the “Key Aspects of Macroprudential Policy,” taking into account the work of international standard setters as well as the evolving country experience with macroprudential policy. The main note is accompanied by supplements offering Detailed Guidance on Instruments and Considerations for Low Income Countries
Key Aspects of Macroprudential Policy Background Paper
Author | : International Monetary Fund. Fiscal Affairs Dept.,International Monetary Fund. Monetary and Capital Markets Department |
Publsiher | : International Monetary Fund |
Total Pages | : 64 |
Release | : 2013-10-06 |
Genre | : Business & Economics |
ISBN | : 9781498341714 |
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The countercyclical capital buffer (CCB) was proposed by the Basel committee to increase the resilience of the banking sector to negative shocks. The interactions between banking sector losses and the real economy highlight the importance of building a capital buffer in periods when systemic risks are rising. Basel III introduces a framework for a time-varying capital buffer on top of the minimum capital requirement and another time-invariant buffer (the conservation buffer). The CCB aims to make banks more resilient against imbalances in credit markets and thereby enhance medium-term prospects of the economy—in good times when system-wide risks are growing, the regulators could impose the CCB which would help the banks to withstand losses in bad times.
Evaluating the Net Benefits of Macroprudential Policy
Author | : Mr.Nicolas Arregui,Mr.Jaromir Benes,Mr.Ivo Krznar,Ms.Srobona Mitra,Mr.Andre Santos |
Publsiher | : International Monetary Fund |
Total Pages | : 73 |
Release | : 2013-07-17 |
Genre | : Business & Economics |
ISBN | : 9781484335727 |
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The paper proposes a simple, new, analytical framework for assessing the cost and benefits of macroprudential policies. It proposes a measure of net benefits in terms of parameters that can be estimated: the probability of crisis, the loss in output given crisis, policy effectiveness in bringing down both the probability and damage during crisis, and the output-cost of a policy decision. It discusses three types of policy leakages and identifies instruments that could best minimize the leakages. Some rules of thumb for policymakers are provided.
Macroprudential Policy and Bank Systemic Risk Does Inflation Targeting Matter
Author | : Mohamed Belkhir,Sami Ben Naceur,Bertrand Candelon,Woon Gyu Choi,Farah Mugrabi |
Publsiher | : International Monetary Fund |
Total Pages | : 46 |
Release | : 2023-06-02 |
Genre | : Business & Economics |
ISBN | : 9798400245008 |
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This paper investigates macroprudential policy effects on bank systemic risk and the role of inflation targeting in such effects. Using bank-level data for 45 countries comprising various monetary and exchange rate regimes, our regime-dependent dynamic panel regression results point to complementarities between monetary and macroprudential policies. We find that the tightening of most macroprudential tools—including DSTI and LTV limits, and capital requirements—reduces bank systemic risk further under inflation targeting. Our findings lend credence to the view that inflation targeting strengthens macroprudential policy roles in mitigating financial stability risks.
What Went Wrong with Capitalism
Author | : Ruchir Sharma |
Publsiher | : Simon and Schuster |
Total Pages | : 384 |
Release | : 2024-06-11 |
Genre | : Business & Economics |
ISBN | : 9781668008287 |
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A century of expanding government has distorted financial markets, stoked massive inequality, and soaked America in debt. Capitalism didn’t fail, it was ruined... What went wrong with capitalism? Ruchir Sharma’s account is not like any you will have heard before. He says progressives are right, in part, when they mock modern capitalism as “socialism for the rich.” For a century, governments have expanded in just about every measurable dimension, from spending to regulation and the scale of financial rescues when the economy wobbles. The result is expensive state guarantees for everyone—bailouts for the rich, entitlements for the middle class, welfare for the poor. Taking you back to the 19th century, Sharma shows how completely the reflexes of government have changed: from hands-off to hands-on, from doing too little to help anyone in hard times to today trying to prevent anyone suffering any economic pain, ever. Trading sins of omission and indifference for excesses of spending and meddling, governments from the United States to Europe and Japan have pumped so much money into their economies that financial markets can no longer invest all that capital efficiently. Inadvertently, they have fueled the rise of monopolies, “zombie” firms, and billionaires. They have made capitalism less fair and less efficient, which is slowing economic growth and fueling popular anger. The first step to a cure is a correct diagnose of the problem. Capitalism has been badly distorted by constant government intervention and the relentless spread of a bailout culture. Building an even bigger state will only double down on what ruined capitalism in the first place.
The Riskiness of Credit Allocation and Financial Stability
Author | : Mr.Luis Brandao-Marques,Qianying Chen,Claudio Raddatz,Jérôme Vandenbussche,Peichu Xie |
Publsiher | : International Monetary Fund |
Total Pages | : 39 |
Release | : 2019-09-27 |
Genre | : Business & Economics |
ISBN | : 9781513513775 |
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We explore empirically how the time-varying allocation of credit across firms with heterogeneous credit quality matters for financial stability outcomes. Using firm-level data for 55 countries over 1991-2016, we show that the riskiness of credit allocation, captured by Greenwood and Hanson (2013)’s ISS indicator, helps predict downside risks to GDP growth and systemic banking crises, two to three years ahead. Our analysis indicates that the riskiness of credit allocation is both a measure of corporate vulnerability and of investor sentiment. Economic forecasters wrongly predict a positive association between the riskiness of credit allocation and future growth, suggesting a flawed expectations process.
The Anatomy of the Transmission of Macroprudential Policies
Author | : Viral V. Acharya,Katharina Bergant,Matteo Crosignani,Tim Eisert,Fergal McCann |
Publsiher | : International Monetary Fund |
Total Pages | : 57 |
Release | : 2020-05-22 |
Genre | : Business & Economics |
ISBN | : 9781513545158 |
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We analyze how regulatory constraints on household leverage—in the form of loan-to-income and loan-to-value limits—a?ect residential mortgage credit and house prices as well as other asset classes not directly targeted by the limits. Supervisory loan level data suggest that mortgage credit is reallocated from low-to high-income borrowers and from urban to rural counties. This reallocation weakens the feedback loop between credit and house prices and slows down house price growth in “hot” housing markets. Consistent with constrained lenders adjusting their portfolio choice, more-a?ected banks drive this reallocation and substitute their risk-taking into holdings of securities and corporate credit.