Changes in Prudential Policy Instruments -- A New Cross-Country Database

31 Pages Posted: 21 Jun 2016

See all articles by Eugenio Cerutti

Eugenio Cerutti

International Monetary Fund (IMF); Johns Hopkins University

Ricardo Correa

Board of Governors of the Federal Reserve System

Elisabetta Fiorentino

Dresden University of Technology

Esther Segalla

Oesterreichische Nationalbank (OeNB)

Multiple version iconThere are 2 versions of this paper

Date Written: 2016-06

Abstract

This paper documents the features of a new database that focuses on changes in the intensity in the usage of several widely used prudential tools, taking into account both macro-prudential and microprudential objectives. The database coverage is broad, spanning 64 countries, and with quarterly data for the period 2000Q1 through 2014Q4. The five types of prudential instruments in the database are: capital buffers, interbank exposure limits, concentration limits, loan to value (LTV) ratio limits, and reserve requirements. A total of nine prudential tools are constructed since some useful further decompositions are presented, with capital buffers divided into four sub-indices: general capital requirements, real state credit specific capital buffers, consumer credit specific capital buffers, and other specific capital buffers; and with reserve requirements divided into two sub-indices: domestic currency capital requirements and foreign currency capital requirements. While general capital requirements have the most changes from the cross-country perspective, LTV ratio limits and reserve requirements have the largest number of tightening and loosening episodes. We also analyze the instruments’ usage in relation to the evolution of key variables such as credit, policy rates, and house prices, finding substantial differences in the patterns of loosening or tightening of instruments in relation to business and financial cycles.

Keywords: Macroprudential policies, Microprudential policies, Financial cycles

JEL Classification: E43, E58, G18, G28

Suggested Citation

Cerutti, Eugenio and Correa, Ricardo and Fiorentino, Elisabetta and Segalla, Esther, Changes in Prudential Policy Instruments -- A New Cross-Country Database (2016-06). FRB International Finance Discussion Paper No. 1169. Available at SSRN: https://ssrn.com/abstract=2798537 or http://dx.doi.org/10.17016/IFDP.2016.1169

Eugenio Cerutti (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street N.W.
Washington, DC 20431
United States

Johns Hopkins University ( email )

Baltimore, MD 21218
United States

Ricardo Correa

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Elisabetta Fiorentino

Dresden University of Technology ( email )

Einsteinstrasse 3
Dresden, 01062
Germany

Esther Segalla

Oesterreichische Nationalbank (OeNB) ( email )

Otto-Wagner-Platz 3, PO Box 61
Vienna,
1010 Vienna, A-1011
Austria

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