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Macroprudential Policies and Dollarisation: Implications for the Financial System and a Cross-Exchange Rate Regime Analysis

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  • Fisnik Bajrami

    (Charles University, Institute of Economic Studies, Faculty of Social Sciences, Prague, Czech Republic.)

Abstract

Macroprudential policy has gained prominence for promoting financial stability. In this paper, we assess the effectiveness of macroprudential policy in reducing credit growth over a 22-year period across 129 countries. Additionally, we investigate the interaction between macroprudential policy, dollarisation, and various exchange rate regimes, examining their impact on different financial stability indicators. Our findings indicate that macroprudential policy significantly reduces credit growth within a quarter of implementation, though this is not evident in the case of soft peg exchange rate regimes. Furthermore, our analysis reveals that dollarised countries exhibit superior outcomes in financial stability when compared to alternative exchange rate regimes.

Suggested Citation

  • Fisnik Bajrami, 2024. "Macroprudential Policies and Dollarisation: Implications for the Financial System and a Cross-Exchange Rate Regime Analysis," Working Papers IES 2024/7, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Feb 2024.
    • Handle: RePEc:fau:wpaper:wp2024_07
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    File URL: https://ies.fsv.cuni.cz/en/macroprudential-policies-and-dollarisation-implications-financial-system-and-cross-exchange-rate
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    More about this item

    Keywords

    macroprudential policy; dollarisation; exchange rate; credit growth; non-performing loans; inflation; interest rates; empirical evaluation;
    All these keywords.

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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