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Borrower- and lender-based macroprudential policies: What works best against bank systemic risk?

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submitted on 2023-11-22, 11:32 and posted on 2023-11-22, 12:45 authored by Nicholas Apergis, Ahmet F. Aysan, Yassine Bakkar

This paper investigates the complementarity between the different macroprudential policies to contain bank systemic risk. We use a newly updated version of the IMF survey on Global Macroprudential Policy Instruments (GMPI). By disentangling the aggregate macroprudential policy index, we assess the complementarity between borrower-targeted and lender-targeted instruments in mitigating systemic risk arising from intra-financial system vulnerabilities. We investigate the effect of boom-bust cycle on such a relationship by analyzing the financial upturns and downturns and show the effectiveness of the macroprudential policies during calm period. We also show that their efficacy in mitigating instability is quite heterogeneous and may vary depending on the set of tools implemented, as well as bank’ size, TBTF, leverage, liquidity and concentration. Our results bear critical policy implications for implementing optimal macroprudential tools and provide insights into the trade-off between financial vis-à-vis price stability.

Other Information

Published in: Journal of International Financial Markets, Institutions and Money
License: http://creativecommons.org/licenses/by/4.0/
See article on publisher's website: https://dx.doi.org/10.1016/j.intfin.2022.101648

Funding

Open Access funding provided by the Qatar National Library.

History

Language

  • English

Publisher

Elsevier

Publication Year

  • 2022

License statement

This Item is licensed under the Creative Commons Attribution 4.0 International License.

Institution affiliated with

  • Hamad Bin Khalifa University
  • College of Islamic Studies - HBKU

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