Research

 Working Papers


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Abstract:  This paper studies whether household-targeted Macroprudential Policy (MaPP) tools, in addition to curbing household (HH) credit growth, increase lending to nonfinancial corporations (NFCs). Panel FE regressions and Inverse Propensity score Weighted Regression-Adjusted Local Projections, that alleviate reverse causality concerns, have been deployed on a quarterly panel of 73 countries in order to address these research questions. A HH-targeted MaPP index has been built using the iMaPP database of the IMF. This index has been disaggregated into demandand supply-side HH-targeted MaPP tools. And within supply-side tools I distinguish between capital- and loan-based tools. Results based on the full sample of countries indicate that indeed HH-targeted tools not only reduce HH lending, but also increase NFC lending. Consequently, the share of NFC loans in banks’ sectoral loan portfolios also increases. Demand-side (i.e., borrower-based) HH-targeted MaPP tools are particularly effective at curbing HH credit growth in Emerging and Developing Economies and also have the strongest positive sectoral spillover effect on NFC lending in Advanced Economies. Amongst the supply-side tools, restrictions and limits on HH lending are found to decrease lending to HHs and increase lending to NFCs more than HH-targeted capital-based tools. These results imply that MaPP not only can dampen total credit growth, but can also influence the sectoral allocation of bank credit.  


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Abstract: This paper evaluates how banks react to Macroprudential Policy (MaPP) by assessing the impact on bank credit, banks’ government bond holdings, and on the pricing of new loans and deposits. It also assesses the Consumer Price Index (CPI) footprint of MaPP. The analysis is based on a monthly panel of Euro Area countries from 2000 to 2017. My results indicate that MaPP has a stronger dampening effect on credit than on the CPI, as expected. Nevertheless, MaPP has a downard pressure on the price level, Monetary Policy’s target. It is also found that banks’ reaction to MaPP via credit quantities is stronger than their reaction via credit prices. This is good news for the Interest Rate Channel of Monetary Policy, as this channel works through interest rates. Total credit experiences a reduction following MaPP, but the effect is not symmetrical across credit segments. Household loans for consumption and loans to nonfinancial corporations exhibit the strongest fall in credit growth following MaPP. While capital-based tools are associated with short-term credit reductions, liquidity-based tools are found to exhert the strongest negative effect on credit. Capital- and liquidity-based MaPP tools are also found to increase banks’ government bond holdings. With respect to interest rates, my results indicate that borrower-based MaPP tools are associated with reductions on mortgage interest rates. Capital-based tools are found to decrease the interest rates on deposits. My results imply that Monetary Policy and Macroprudential Policy coordination is justified. 


(Joint work with Lukas Diebold) 

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Abstract: Financial deregulation has important implications beyond the realm of finance, and these effects differ by race. In this paper we use staggered difference-in-differences to link state level banking deregulation during the 1980s in the United States to two demographic outcomes: mothers' age at first childbirth and fertility rates. We find that after deregulation the average age at which women become mothers for the first time increases, and that this effect is stronger for the non-white population. The average effect on total fertility is positive over short horizons, but reverts back to zero over longer horizons. For the non-white sample, however, this reversion outweighs the previous increase, resulting in a net fertility decrease. We argue that the main channel for these effects is the boom in house prices induced by deregulation. On the one hand, this boom delays fertility by prolonging the period of saving before a home purchase, on the other, it reflects a wealth gain for home owning families, linked to increased fertility. Given the stark discrepancy in financial constraints and home ownership rates between the white and non-white population in the US, the relative strength of the channels differs, resulting in significant heterogeneity in outcomes.