Global Financial Cycle, Household Credit, and Macroprudential Policies
Management Science, Forthcoming
59 Pages Posted: 30 Sep 2017 Last revised: 10 Mar 2023
There are 2 versions of this paper
Global Financial Cycle, Household Credit, and Macroprudential Policies
Household Credit, Global Financial Cycle, and Macroprudential Policies: Credit Register Evidence from an Emerging Country
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: Suggested Citation