Household Credit, Global Financial Cycle, and Macroprudential Policies : Credit Register Evidence from an Emerging Country.

Epure, Mircea.
Washington, D. C. : International Monetary Fund, 2018.
1 online resource (47 pages)

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We analyze the effects of macroprudential policies on local bank credit cycles and interactions with international financial conditions. For identification, we exploit the comprehensive credit register containing all bank loans to individuals in Romania, a small open economy subject to external shocks, and the period 2004-2012, which covers a full boom-bust credit cycle when a wide range of macroprudential measures were deployed. Although household leverage is known to be a key driver of financial crises, to our knowledge this is the first paper that employs a household credit register to study leverage and macroprudential policies over a full economic cycle. Our results show that tighter macroprudential conditions are associated with a significant decline in household credit, with substantially stronger effects for foreign currency (FX) loans than for local currency loans. The effects on FX loans are higher for: (i) ex-ante riskier borrowers proxied by higher debt-service-toincome ratios and (ii) banks with greater exposure to foreign funding. Moreover, tighter macroprudential policy has stronger dampening effects on FX lending when global risk appetite is high and foreign monetary policy is expansionary. Finally, quantitative effects are in general larger for borrower rather than lender macroprudential policies.
Table of Contents
1. Introduction
2. Institutional Background
2.1 Macroeconomic Environment
2.2 Macroprudential Policies
3. Data and Empirical Strategy
3.1 Credit Register
3.2 Macro Variables
3.3 Empirical Specifications
4. Results
4.1 FX Loans
4.2 Borrower Riskiness
4.3 Bank Exposure to Foreign Funding
4.4 Spillovers from Global Uncertainty and Risk Appetite
4.5 Spillovers from Foreign Monetary Policy
5. Conclusions
Figures and Tables
Appendix Figures and Tables
List of figures
1. Household Credit Growth and Macroprudential Policy
2. Household Credit by Type and Currency
List of tables
1. Descriptive Statistics
2. Macroprudential Policies and Household Credit-FX loans
3. Macroprudential Policies and Household Credit-Borrower Riskiness
4. Macroprudential Policies and Household Credit-Bank exposure to foreign funding
5. Spillovers of Global Risk Appetite on Household Credit
6. Spillovers of Foreign Monetary Policy on Household Credit
List of appendix figures
A1. Household and Corporate Credit Growth
List of appendix tables
A1. Macroprudential Policy Measures, 2004-2012
A2. Variable Definitions and Sources
A3. Local Macro Determinants of Macroprudential Policies
A4. Macroprudential Policies and Household Credit-FX loans-All Covariates
A5. Macroprudential Policies and Household Credit-FX loans-By Currency
A6. Macroprudential Policies and Household Credit-Borrower Riskiness-By Currency
A7. Spillovers of Global Risk Appetite on Household Credit-By Loan Type.
Description based on publisher supplied metadata and other sources.
Mihai, Irina.
Minoiu, Ms. Camelia.