Global Financial Cycle, Household Credit, and Macroprudential Policies

Management Science, Forthcoming

59 Pages Posted: 30 Sep 2017 Last revised: 10 Mar 2023

See all articles by Mircea Epure

Mircea Epure

Universitat Pompeu Fabra - Department of Economics and Business; Barcelona School of Economics; UPF Barcelona School of Management

Irina Mihai

National Bank of Romania; Bucharest University of Economic Studies

Camelia Minoiu

Federal Reserve Bank of Atlanta

José-Luis Peydró

Imperial College London; Centre for Economic Policy Research (CEPR); Universitat Pompeu Fabra - Faculty of Economic and Business Sciences

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Date Written: March 9, 2023

Abstract

We show that macroprudential policies dampen the impact of global financial conditions on local bank credit cycles. For identification, we exploit variation in the U.S. VIX and household and business credit registers in an emerging market economy where banks depend on foreign funding and macroprudential measures vary over the full cycle. Our results suggest that when the VIX is low, tighter macroprudential policies reduce household lending, notably for riskier (FX and high DSTI) loans and by banks dependent on foreign funding. Moreover, they increase (less regulated) local currency lending to real estate firms, while leaving business lending to other firms unchanged. Such periods are associated with less subsequent total lending to households and firms and with a lower share of FX loans at the local level. Consistently, when the VIX is low, tighter macroprudential policies dampen house prices and economic activity.

Keywords: global financial cycle, macroprudential policies, boom-bust credit cycle, bank loans to households and firms, credit registry, emerging markets

JEL Classification: G01, G21, G28, F30, E58

Suggested Citation

Epure, Mircea and Mihai, Irina and Minoiu, Camelia and Peydro, Jose-Luis, Global Financial Cycle, Household Credit, and Macroprudential Policies (March 9, 2023). Management Science, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3044959 or http://dx.doi.org/10.2139/ssrn.3044959

Mircea Epure

Universitat Pompeu Fabra - Department of Economics and Business ( email )

Ramon Trias Fargas 25-27
Barcelona, 08005
Spain

HOME PAGE: http://mirceaepure.com

Barcelona School of Economics ( email )

Carrer de Ramon Trias Fargas, 25-27
Barcelona, 08005
Spain

UPF Barcelona School of Management ( email )

Carrer de Balmes, 132, 134
Barcelona, 08008
Spain

Irina Mihai

National Bank of Romania ( email )

Bucharest
Romania

Bucharest University of Economic Studies ( email )

Tache Ionescu street, no. 11, sector 1
Bucharest
Romania

Camelia Minoiu (Contact Author)

Federal Reserve Bank of Atlanta ( email )

1000 Peachtree Street N.E.
Atlanta, GA 30309-4470
United States

Jose-Luis Peydro

Imperial College London ( email )

South Kensington Campus
Exhibition Road
London, Greater London SW7 2AZ
United Kingdom

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Universitat Pompeu Fabra - Faculty of Economic and Business Sciences ( email )

Ramon Trias Fargas 25-27
Barcelona, Barcelona 08005
Spain
(+34) 93 542 1756 (Phone)
(+34) 93 542 1746 (Fax)

HOME PAGE: http://https://sites.google.com/site/joseluispeydroswebpage/

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