Macroprudential Policies, Economic Growth, and Banking Crises

55 Pages Posted: 10 Jun 2020

See all articles by Mohamed Belkhir

Mohamed Belkhir

UAE University

Sami Ben Naceur

International Monetary Fund (IMF)

Bertrand Candelon

Catholic University of Louvain (UCL) - Louvain Finance (LFIN)

Jean-Charles Wijnandts

Bank of England

Date Written: May 2020

Abstract

Using a sample that covers more than 100 countries over the 2000-2017 period, we assess the impact of macroprudential policies on financial stability. In particular, we examine whether the activation of macroprudential policies is conducive to a lower incidence of systemic banking crises. Our empirical setup is designed to account for the potential direct and indirect effects that macroprudential policies can have on banking crises. We find that while macro-prudential policies exert a direct stabilizing effect, they also have an indirect destabilizing effect, which works through the depressing of economic growth. A Generalized Impulse Response Function analysis of a dynamic system composed of the probability of a banking crisis and economic growth reveals, however, that macroprudential policies have a positive net effect on financial stability (lower likelihood of systemic banking crises).

Keywords: Real sector, Financial crises, Macroprudential policies and financial stability, Financial institutions, Financial systems, Macroprudential Policies, Banking crises, Economic Growth, WP, emerge market economy, bank crisis, advanced economy, MPI, basis point

JEL Classification: C33, G01, G18, E52, G21, E01, E63, G2

Suggested Citation

Belkhir, Mohamed and Ben Naceur, Sami and Candelon, Bertrand and Wijnandts, Jean-Charles, Macroprudential Policies, Economic Growth, and Banking Crises (May 2020). IMF Working Paper No. 20/65, Available at SSRN: https://ssrn.com/abstract=3623885

Mohamed Belkhir (Contact Author)

UAE University ( email )

College of Business and Economics
P.O.Box 17555
Al Ain, 17555
United Arab Emirates

Sami Ben Naceur

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Bertrand Candelon

Catholic University of Louvain (UCL) - Louvain Finance (LFIN) ( email )

34 Voie du Roman Pays - L1.03.01
Louvain-la-Neuve, 1348
Belgium

Jean-Charles Wijnandts

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

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