Credit Growth and the Effectiveness of Reserve Requirements and Other Macroprudential Instruments in Latin America

30 Pages Posted: 9 Aug 2012

See all articles by Camilo Ernesto Tovar Mora

Camilo Ernesto Tovar Mora

affiliation not provided to SSRN

Mercedes Garcia-Escribano

University of Chicago - Department of Economics

Mercedes Vera Martin

affiliation not provided to SSRN

Date Written: June 2012

Abstract

Over the past decade policy makers in Latin America have adopted a number of macroprudential instruments to manage the procyclicality of bank credit dynamics to the private sector and contain systemic risk. Reserve requirements, in particular, have been actively employed. Despite their widespread use, little is known about their effectiveness and how they interact with monetary policy. In this paper, we examine the role of reserve requirements and other macroprudential instruments and report new cross-country evidence on how they influence real private bank credit growth. Our results show that these instruments have a moderate and transitory effect and play a complementary role to monetary policy.

Keywords: Reserve Requirements, Counter Cyclical Policy, Credit, Monetary Transmission Mechanism, Interest Rate Spreads, Banking Systems, Central Bank Policy, Credit Expansion, Latin America, Macroprudential Policy

JEL Classification: E58, G21, G28

Suggested Citation

Tovar Mora, Camilo Ernesto and Garcia-Escribano, Mercedes and Vera Martin, Mercedes, Credit Growth and the Effectiveness of Reserve Requirements and Other Macroprudential Instruments in Latin America (June 2012). IMF Working Paper No. 12/142, Available at SSRN: https://ssrn.com/abstract=2127035

Camilo Ernesto Tovar Mora (Contact Author)

affiliation not provided to SSRN

No Address Available

Mercedes Garcia-Escribano

University of Chicago - Department of Economics ( email )

1126 East 59th Street
Chicago, IL 60637
United States

Mercedes Vera Martin

affiliation not provided to SSRN

No Address Available

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