Author: Mr. Heedon Kang, Mr. Francis Vitek, Ms. Rina Bhattacharya, Mr. Phakawa Jeasakul, Ms. Sònia Muñoz, Naixi Wang, and Rasool Zandvakil
This paper analyzes cross-border macrofinancial spillovers from a variety of
macroprudential policy measures, using a range of quantitative methods. Event study and
panel regression analyses find that liquidity and sectoral macroprudential policy measures
often affect cross-border bank credit, whereas capital measures do not. This empirical
evidence is stronger for tightening than for loosening measures, is distributed across credit
leakage and reallocation effects, and is generally regionally concentrated. Consistently,
structural model based simulation analysis indicates that output and bank credit spillovers
from sectoral macroprudential policy shocks are generally small worldwide, but are
regionally concentrated and economically significant for countries connected by strong
trade or financial linkages. This simulation analysis also indicates that countercyclical
capital buffer adjustments have the potential to generate sizeable regional spillovers.
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