Macroprudential Tools, Transmission and Modelling
Carreras O, Davis E P and Piggott R (2016) “Macroprudential tools, transmission and modelling”, Firstrun Deliverable 4.7, Horizon 2020 and NIESR Discussion Paper 470
58 Pages Posted: 13 May 2017
Date Written: August 31, 2016
Abstract
The purpose of this paper is twofold. First, we review the theoretical and empirical literature on macroprudential policies and tools. Second, we test empirically the effectiveness of several macroprudential policies and tools using three datasets from the IMF and BIS that cover up to 19 OECD countries during 2000-2014, thus giving wide coverage of instruments. In addition, our focus on OECD countries gives us access to a wider range of control variables whose omission may lead to excessively favourable results on the impact of macroprudential policies. We find evidence that macroprudential polices are effective at curbing house price and credit growth, albeit some tools are more effective than others. These include, in particular, taxes on financial institutions and strict loan-to-value and debt-to-income ratio limits.
Keywords: macroprudential policy, house prices, credit, systemic risk
JEL Classification: E58, G28
Suggested Citation: Suggested Citation