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Macroprudential Policy, Countercyclical Bank Capital Buffers and Credit Supply: Evidence from the Spanish Dynamic Provisioning ExperimentsGabriel JiménezBank of Spain Steven OngenaTilburg University - CentER, European Banking Center (EBC); Centre for Economic Policy Research (CEPR) Jose-Luis PeydroUniversitat Pompeu Fabra - Faculty of Economic and Business Sciences; Barcelona Graduate School of Economics Jesus Saurina SalasBank of Spain February 20, 2013 European Banking Center Discussion Paper No. 2012-011 Abstract: We analyze the impact of countercyclical capital buffers held by banks on the supply of credit to firms and their subsequent performance. Spain introduced dynamic provisioning unrelated to specific bank loan losses in 2000 and modified its formula parameters in 2005 and 2008. In each case, individual banks were impacted differently. The resultant bank-specific shocks to capital buffers, coupled with comprehensive bank-, firm-, loan-, and loan application-level data, allow us to identify its impact on the supply of credit and on real activity. Our estimates show that countercyclical dynamic provisioning smooths cycles in the supply of credit and in bad times upholds firm financing and performance.
Number of Pages in PDF File: 60 Keywords: bank capital, dynamic provisioning, credit availability, financial crisis JEL Classification: E51, E58, E60, G21, G28 working papers seriesDate posted: May 1, 2012 ; Last revised: February 21, 2013Suggested CitationContact Information
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