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Credit Growth and the Effectiveness of Reserve Requirements and Other Macroprudential Instruments in Latin America

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  • International Monetary Fund

Abstract

Over the past decade policy makers in Latin America have adopted a number of macroprudential instruments to manage the procyclicality of bank credit dynamics to the private sector and contain systemic risk. Reserve requirements, in particular, have been actively employed. Despite their widespread use, little is known about their effectiveness and how they interact with monetary policy. In this paper, we examine the role of reserve requirements and other macroprudential instruments and report new cross-country evidence on how they influence real private bank credit growth. Our results show that these instruments have a moderate and transitory effect and play a complementary role to monetary policy.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 12/142.

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Length: 29
Date of creation: 01 Jun 2012
Date of revision:
Handle: RePEc:imf:imfwpa:12/142

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Keywords: Reserve requirements; Credit; Monetary transmission mechanism; Banking systems; Central bank policy; Credit expansion; Latin America; Macroprudential Policy; bank credit; banking; monetary policy; central bank; monetary fund; banking system; marginal reserve requirements; foreign exchange; inflation; private bank; bank data; reserve requirement; bank assets; central banking; small bank; bank deposits; monetary regime; bank behavior; banking institutions; bank funding; banking sector; bank intermediation; time deposit; inflation-targeting; banks liabilities; disintermediation; bank lending; monetary transmission; bank liabilities; aggregate demand; monetary economics; monetary instrument; bank lending rates; monetary policy instrument; bank solvency; monetary conditions; deposit insurance; bank of korea; bank policy; deposit banking; banks ? liabilities; bank capitalization; segmentation; bank capital; open market operations; var model; credit policy; monetary policies; bank financing;

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References

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  1. Christian Glocker & Pascal Towbin, 2012. "The Macroeconomic Effects Of Reserve Requirements," EcoMod2012 3850, EcoMod.
  2. Christian Glocker & Pascal Towbin, 2012. "Reserve Requirements for Price and Financial Stability: When Are They Effective?," International Journal of Central Banking, International Journal of Central Banking, International Journal of Central Banking, vol. 8(1), pages 65-114, March.
  3. Reinhart, Carmen M & Reinhart, Vincent R, 1999. "On the Use of Reserve Requirements in Dealing with Capital Flow Problems," International Journal of Finance & Economics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 4(1), pages 27-54, January.
  4. R. Gaston Gelos, 2009. "Banking Spreads In Latin America," Economic Inquiry, Western Economic Association International, Western Economic Association International, vol. 47(4), pages 796-814, October.
  5. International Monetary Fund, 2011. "Policy Instruments to Lean Against the Wind in Latin America," IMF Working Papers, International Monetary Fund 11/159, International Monetary Fund.
  6. Carlos Montoro & Ramon Moreno, 2011. "The use of reserve requirements as a policy instrument in Latin America," BIS Quarterly Review, Bank for International Settlements, Bank for International Settlements, March.
  7. International Monetary Fund, 2011. "Macroprudential Policy," IMF Working Papers, International Monetary Fund 11/238, International Monetary Fund.
  8. Glocker, Ch. & Towbin P., 2012. "The Macroeconomic Effects of Reserve Requirements," Working papers, Banque de France 374, Banque de France.
  9. Leon, David & Quispe, Zenon, 2010. "El encaje como instrumento no convencional de Política Monetaria," Revista Moneda, Banco Central de Reserva del Perú, Banco Central de Reserva del Perú, issue 143, pages 8-16.
  10. Pierre-Richard Agénor & K. Alper & L. Pereira da Silva, 2012. "Sudden Floods, Prudential Regulation and Stability in an Open Economy," Working Papers Series, Central Bank of Brazil, Research Department 267, Central Bank of Brazil, Research Department.
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Citations

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Cited by:
  1. Carrera, Cesar & Vega, Hugo, 2012. "Interbank Market and Macroprudential Tools in a DSGE Model," Working Papers, Banco Central de Reserva del Perú 2012-014, Banco Central de Reserva del Perú.
  2. Patrick A. Imam & Erlend Nier & Luis Ignacio Jácome, 2012. "Building Blocks for Effective Macroprudential Policies in Latin America," IMF Working Papers, International Monetary Fund 12/183, International Monetary Fund.
  3. Renzo Rossini & Zenon Quispe & Enrique Serrano, 2013. "Foreign exchange intervention in Peru," BIS Papers chapters, Bank for International Settlements, in: Bank for International Settlements (ed.), Sovereign risk: a world without risk-free assets?, volume 73, pages 243-262 Bank for International Settlements.
  4. Bank for International Settlements, 2012. "Operationalising the selection and application of macroprudential instruments," CGFS Papers, Bank for International Settlements, number 48.
  5. Tito Cordella & Pablo M. Federico & Carlos A. Vegh & Guillermo Vuletin, 2014. "Reserve Requirements in the Brave New Macroprudential World," World Bank Publications, The World Bank, number 17584, August.
  6. Pierre-Richard Agénor & Luiz A. Pereira da Silva, 2013. "Inflation Targeting and Financial Stability: A Perspective from the Developing World," Working Papers Series, Central Bank of Brazil, Research Department 324, Central Bank of Brazil, Research Department.
  7. Jerome Vandenbussche & Ursula Vogel & Enrica Detragiache, 2012. "Macroprudential Policies and Housing Price," IMF Working Papers, International Monetary Fund 12/303, International Monetary Fund.
  8. Kenneth N. Kuttner & Ilhyock Shim, 2013. "Can Non-Interest Rate Policies Stabilize Housing Markets? Evidence from a Panel of 57 Economies," NBER Working Papers 19723, National Bureau of Economic Research, Inc.
  9. Nicolas E. Magud & Evridiki Tsounta, 2012. "To Cut or Not to Cut? That is the (Central Bank’s) Question In Search of the Neutral Interest Rate in Latin America," IMF Working Papers, International Monetary Fund 12/243, International Monetary Fund.

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