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Macroprudential Policies in Southeastern Europe
Author:
Dilyana Dimova
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,
Ms. Piyabha Kongsamut
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Mr. Jerome Vandenbussche
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Series:
IMF Working Papers
Volume/Issue:
Volume 2016: Issue 029
Language:
English
Publication Date:
15 Feb 2016
DOI:
https://doi.org/10.5089/9781498342872.001
ISBN:
9781498342872
ISSN:
1018-5941
Pages:
81
Keywords:
WP; credit growth; FC lending; liquidity ratio; central bank; FC-indexed loan; Macroprudential Policies; Financial Stability; Southeastern Europe; LCP measure; reserve requirement; Reserve requirements; Credit; Loans; Domestic credit; Currencies; Global
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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This paper presents a detailed account of the rich set of macroprudential measures taken in four Southeastern European countries—Bulgaria, Croatia, Romania, and Serbia—during their synchronized boom and bust cycles in 2003–12, and assesses their effectiveness. We find that only strong measures helped contain domestic credit growth, the share of foreigncurrency- denominated loans provided by the domestic banking sector, or the domestic banking sector’s reliance on foreign borrowing during the boom years. We also find that circumvention via direct external borrowing often fully offset the effectiveness of these strict measures, and thatmeasures taken during the bust had no discernible impact. We conclude that (i) proper calibration of macroprudential measures is of the essence; (ii) only strong, broad-based macroprudential measures can contain credit booms; (iii) econometric studies of macroprudential policy effectiveness should focus on measures rather than on instruments (i.e. classes of measures) and in so doing allow for possible non-linear and state-contingent effects.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund