The Impact of Seven Macroprudential Policy Instruments on Financial Stability in Six Euro Area Economies
The aim of this paper is to investigate whether macroprudential policy instruments can influence the credit growth rate and hence financial stability. We use a fixed effects panel regression model to test the following hypothesis for six euro area economies (Austria, Finland, Germany, Italy, Netherl...
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| Format: | Article |
| Language: | English |
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Sciendo
2021-09-01
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| Series: | Review of Economic Perspectives |
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| Online Access: | https://doi.org/10.2478/revecp-2021-0012 |
| _version_ | 1818779200894533632 |
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| author | Lorenčič Eva Festić Mejra |
| author_facet | Lorenčič Eva Festić Mejra |
| author_sort | Lorenčič Eva |
| collection | DOAJ |
| description | The aim of this paper is to investigate whether macroprudential policy instruments can influence the credit growth rate and hence financial stability. We use a fixed effects panel regression model to test the following hypothesis for six euro area economies (Austria, Finland, Germany, Italy, Netherlands and Spain) during time span 2010 Q3 to 2018 Q4: “Macroprudential policy instruments (degree of maturity mismatch; interbank loans as a percentage of total loans; leverage ratio; non-deposit funding as a percentage of total funding; loan-to-value ratio; loan-to-deposit ratio; solvency ratio) enhance financial stability, as measured by credit growth”. Our empirical results suggest that the degree of maturity mismatch, non-deposit funding as a percentage of total funding, loan-to-value ratio and loan-to-deposit ratio exhibit the predicted impact on the credit growth rate and therefore on financial stability. On the other hand, interbank loans as a percentage of total loans, leverage ratio, and solvency ratio do not exhibit the expected impact on the response variable. Since only four regressors (out of seven) have the signs predicted by our hypothesis, we can only partly confirm it. |
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| format | Article |
| id | doaj.art-c328ba5950f34d43bfcd92ff08814be2 |
| institution | Directory Open Access Journal |
| issn | 1804-1663 |
| language | English |
| last_indexed | 2024-12-18T11:56:51Z |
| publishDate | 2021-09-01 |
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| spelling | doaj.art-c328ba5950f34d43bfcd92ff08814be22022-12-21T21:09:02ZengSciendoReview of Economic Perspectives1804-16632021-09-0121325929010.2478/revecp-2021-0012The Impact of Seven Macroprudential Policy Instruments on Financial Stability in Six Euro Area EconomiesLorenčič Eva0Festić Mejra1Credit Suisse AG, Zurich, Switzerland and University of Maribor, Maribor, SloveniaUniversity of Maribor, Maribor, SloveniaThe aim of this paper is to investigate whether macroprudential policy instruments can influence the credit growth rate and hence financial stability. We use a fixed effects panel regression model to test the following hypothesis for six euro area economies (Austria, Finland, Germany, Italy, Netherlands and Spain) during time span 2010 Q3 to 2018 Q4: “Macroprudential policy instruments (degree of maturity mismatch; interbank loans as a percentage of total loans; leverage ratio; non-deposit funding as a percentage of total funding; loan-to-value ratio; loan-to-deposit ratio; solvency ratio) enhance financial stability, as measured by credit growth”. Our empirical results suggest that the degree of maturity mismatch, non-deposit funding as a percentage of total funding, loan-to-value ratio and loan-to-deposit ratio exhibit the predicted impact on the credit growth rate and therefore on financial stability. On the other hand, interbank loans as a percentage of total loans, leverage ratio, and solvency ratio do not exhibit the expected impact on the response variable. Since only four regressors (out of seven) have the signs predicted by our hypothesis, we can only partly confirm it.https://doi.org/10.2478/revecp-2021-0012macroprudential policymacroprudential instrumentssystemic riskfinancial stabilitye58g28e60e44 |
| spellingShingle | Lorenčič Eva Festić Mejra The Impact of Seven Macroprudential Policy Instruments on Financial Stability in Six Euro Area Economies Review of Economic Perspectives macroprudential policy macroprudential instruments systemic risk financial stability e58 g28 e60 e44 |
| title | The Impact of Seven Macroprudential Policy Instruments on Financial Stability in Six Euro Area Economies |
| title_full | The Impact of Seven Macroprudential Policy Instruments on Financial Stability in Six Euro Area Economies |
| title_fullStr | The Impact of Seven Macroprudential Policy Instruments on Financial Stability in Six Euro Area Economies |
| title_full_unstemmed | The Impact of Seven Macroprudential Policy Instruments on Financial Stability in Six Euro Area Economies |
| title_short | The Impact of Seven Macroprudential Policy Instruments on Financial Stability in Six Euro Area Economies |
| title_sort | impact of seven macroprudential policy instruments on financial stability in six euro area economies |
| topic | macroprudential policy macroprudential instruments systemic risk financial stability e58 g28 e60 e44 |
| url | https://doi.org/10.2478/revecp-2021-0012 |
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