Household Credit, Global Financial Cycle, and Macroprudential Policies: Credit Register Evidence from an Emerging Country

47 Pages Posted: 20 Feb 2018 Last revised: 21 Mar 2018

See all articles by Mircea Epure

Mircea Epure

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

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Date Written: January 2018

Abstract

We analyze the effects of macroprudential policies on local bank credit cycles and interactions with international financial conditions. For identification, we exploit the comprehensive credit register containing all bank loans to individuals in Romania, a small open economy subject to external shocks, and the period 2004-2012, which covers a full boom-bust credit cycle when a wide range of macroprudential measures were deployed. Although household leverage is known to be a key driver of financial crises, to our knowledge this is the first paper that employs a household credit register to study leverage and macroprudential policies over a full economic cycle. Our results show that tighter macroprudential conditions are associated with a significant decline in household credit, with substantially stronger effects for foreign currency (FX) loans than for local currency loans. The effects on FX loans are higher for: (i) ex-ante riskier borrowers proxied by higher debt-service-toincome ratios and (ii) banks with greater exposure to foreign funding. Moreover, tighter macroprudential policy has stronger dampening effects on FX lending when global risk appetite is high and foreign monetary policy is expansionary. Finally, quantitative effects are in general larger for borrower rather than lender macroprudential policies.

Keywords: Household credit, Romania, Europe, Central banks and their policies, macroprudential policies, global financial cycle, cross-border spillovers, General

JEL Classification: E51, E58, E60, G21, G28

Suggested Citation

Epure, Mircea and Mihai, Irina and Minoiu, Camelia and Peydro, Jose-Luis, Household Credit, Global Financial Cycle, and Macroprudential Policies: Credit Register Evidence from an Emerging Country (January 2018). IMF Working Paper No. 18/13, Available at SSRN: https://ssrn.com/abstract=3124398

Mircea Epure (Contact Author)

Universitat Pompeu Fabra (UPF) - 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

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 (UPF) - 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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