498 - Effective macroprudential policy: Cross-sector substitution from price and quantity measures

DNB Working Papers
Date 1 February 2016
Macroprudential policy is increasingly being implemented worldwide. Key questions are its effectiveness in influencing bank credit and substitution effects beyond banking. Our results confirm the expected effects of macroprudential policies on bank credit, both for advanced economies and emerging market economies. But results also confirm substitution effects towards non-bank credit, especially in advanced economies, reducing the policies’ effect on total credit. Quantity restrictions are particularly potent in constraining bank credit but also cause the strongest substitution effects. Policy implications indicate a need to extend macroprudential policy beyond banking, especially in advanced economies.
 
Keywords: Financial cycle, macroprudential regulation, financial supervision, (shadow) banking.
JEL classifications: E58, G10, G18, G20, G58.