Do Macroprudential and Monetary Policies Interact in Shaping Bank Stability? International Evidence

Posted: 11 Dec 2019

See all articles by Ana Lozano-Vivas

Ana Lozano-Vivas

University of Malaga

Fotios Pasiouras

GSCM-Montpellier Business School

Date Written: November 24, 2019

Abstract

In recent years, numerous countries around the globe have adopted macroprudential policies. However, the understanding of these policies and how exactly they impact the banking industry remains limited. Using a sample of 1,534 banks from 57 countries, we examine whether and how macroprudential and monetary policies interact in shaping bank stability. The results show that the positive impact of macroprudential policies on bank stability is enhanced in countries with higher central bank policy rates. Additional analysis reveals that this result is driven by financial institution-targeted instruments rather than borrower-targeted ones. These findings are robust to the use of various bank-level and country-level control variables, alternative indicators of bank-risk, and methodological approaches.

Keywords: Bank risk, Macroprudential policy, Monetary policy

JEL Classification: G21, G28

Suggested Citation

Lozano-Vivas, Ana and Pasiouras, Fotios, Do Macroprudential and Monetary Policies Interact in Shaping Bank Stability? International Evidence (November 24, 2019). Available at SSRN: https://ssrn.com/abstract=3492547

Ana Lozano-Vivas (Contact Author)

University of Malaga ( email )

Dept. of Economics
Malaga, MALAGA 29071
Spain
+34952131256 (Phone)

HOME PAGE: http://www.uma.es/departamento-de-teoria-e-historia-economica/info/50200/ana-lozano-vivas/

Fotios Pasiouras

GSCM-Montpellier Business School ( email )

2300, Avenue des Moulins
Montpellier, 34185
France

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