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Macroprudential Policy, Countercyclical Bank Capital Buffers and Credit Supply: Evidence from the Spanish Dynamic Provisioning Experiments

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  • Gabriel Jiménez
  • Steven Ongena
  • José-Luis Peydró
  • Jesús Saurina

Abstract

We analyze the impact of the countercyclical capital buffers held by banks on the supply of credit to firms and their subsequent performance. Countercyclical ‘‘dynamic’’ provisioning that is unrelated to specific loan losses was introduced in Spain in 2000, and modified in 2005 and 2008. These policy experiments which entailed bank-specific shocks to capital buffers, combined with the financial crisis that shocked banks according to their available pre-crisis buffers, underpin our identification strategy. Our estimates from comprehensive bank-, firm-, loan-, and loan application-level data suggest that countercyclical capital buffers help smooth credit supply cycles and in bad times have positive effects on firm credit availability, assets, employment and survival. Our findings therefore hold important implications for theory and macroprudential policy.

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Bibliographic Info

Paper provided by Barcelona Graduate School of Economics in its series Working Papers with number 628.

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Date of creation: May 2012
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Handle: RePEc:bge:wpaper:628

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Keywords: bank capital; dynamic provisioning; credit availability; financial crisis;

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Cited by:
  1. Aiyar, Shekhar & Calomiris , Charles W & Wieladek, Tomasz, 2012. "Does macropru leak? Evidence from a UK policy experiment," Bank of England working papers, Bank of England 445, Bank of England.
  2. Claessens, Stijn & Ghosh, Swati R. & Mihet, Roxana, 2013. "Macro-prudential policies to mitigate financial system vulnerabilities," Journal of International Money and Finance, Elsevier, Elsevier, vol. 39(C), pages 153-185.
  3. Paolo Angelini & Sergio Nicoletti-Altimari & Ignazio Visco, 2012. "Macroprudential, microprudential and monetary policies: conflicts, complementarities and trade-offs," Questioni di Economia e Finanza (Occasional Papers), Bank of Italy, Economic Research and International Relations Area 140, Bank of Italy, Economic Research and International Relations Area.
  4. Ozlem Akin & José G. Montalvo & Jaume García Villar & José-Luis Peydró & Josep Maria Raya, 2014. "The Real Estate and Credit Bubble: Evidence from Spain," Working Papers 772, Barcelona Graduate School of Economics.
  5. Ongena, S. & Peydro, J.L. & Horen, N. van, 2013. "Shocks Abroad, Pain at Home? Bank-firm Level Evidence on the International Transmission of Financial Shocks," Discussion Paper, Tilburg University, Center for Economic Research 2013-040, Tilburg University, Center for Economic Research.
  6. Fabia A. de Carvalho & Marcos R. Castro & Silvio M. A. Costa, 2013. "Traditional and Matter-of-fact Financial Frictions in a DSGE Model for Brazil: the role of macroprudential instruments and monetary policy," Working Papers Series, Central Bank of Brazil, Research Department 336, Central Bank of Brazil, Research Department.
  7. Ozlem Akin & José Garcia Montalvo & Jaume Garcia Villar & José-Luis Peydró & Josep M. Raya, 2014. "The real estate and credit bubble: Evidence from Spain," Economics Working Papers, Department of Economics and Business, Universitat Pompeu Fabra 1430, Department of Economics and Business, Universitat Pompeu Fabra.
  8. Stijn Claessens & Laura E. Kodres, 2014. "The Regulatory Responses to the Global Financial Crisis: Some Uncomfortable Questions," IMF Working Papers, International Monetary Fund 14/46, International Monetary Fund.

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