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Leakages from Macroprudential Regulations: The Case of Household-Specific Tools and Corporate Credit
Author:
Lucyna Gornicka
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Peichu Xie null

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Series:
IMF Working Papers
Volume/Issue:
Volume 2021: Issue 113
Language:
English
Publication Date:
29 Apr 2021
DOI:
https://doi.org/10.5089/9781513573731.001
ISBN:
9781513573731
ISSN:
1018-5941
Pages:
35
Keywords:
standards survey; credit vulnerability; leakage effect; credit riskiness; bond credit ratio ma; Credit; Macroprudential policy; Bank credit; Macroprudential policy instruments; Corporate sector; Global
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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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Sector-specific macroprudential regulations increase the riskiness of credit to other sectors. Using firm-level data, this paper computed the measures of the riskiness of corporate credit allocation for 29 advanced and emerging economies. Consistently across these measures, the paper finds that during credit expansions, an unexpected tightening of household-specific macroprudential tools is followed by a rise in riskier corporate lending. Quantitatively, such unexpected tightening during a period of rapid credit growth increases the riskiness of corporate credit by around 10 percent of the historical standard deviation. This result supports early policy interventions when credit vulnerabilities are still low, since sectoral leakages will be less important at this stage. Further evidence from bank lending standards surveys suggests that the leakage effects are stronger for larger firms compared to SMEs, consistent with recent evidence on the use of personal real estate as loan collateral by small firms.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund