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The impact of cross-border capital flows macro-prudential management policy on bank credit

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  • Cui, Yuanmiao
  • Fang, Xia
  • Hu, Xuyiyang
  • Fu, Kaina
  • Yang, Zhenyu

Abstract

This study examines the impact of cross-border capital flow-oriented macro-prudential policies (MPPs) on banking credit dynamics through a quasi-natural experiment encompassing 110 countries from 2000 to 2020. The findings reveal that MPPs significantly mitigate banking credit growth, with more pronounced effects during the post-financial-crisis period. These policies act through commodity prices and exchange rate movements by tempering capital inflows, thereby reducing excessive credit expansion and curbing systemic financial risks. The efficacy of MPPs is critically shaped by regulatory frameworks, the degree of economic liberalization, and the concentration dynamics within banking sectors, collectively underscoring the indispensable role of institutional robustness and competitive market mechanisms in policy implementation. Furthermore, the study uncovers an asymmetrical policy impact, with MPPs demonstrating enhanced efficacy in countries characterized by more advanced financial development. These results have significant policy implications, emphasizing the strategic value of targeted macro-prudential measures in three crucial areas: stabilizing credit cycles, enhancing financial system resilience, and preventing the cross-border contagion of financial vulnerabilities.

Suggested Citation

  • Cui, Yuanmiao & Fang, Xia & Hu, Xuyiyang & Fu, Kaina & Yang, Zhenyu, 2025. "The impact of cross-border capital flows macro-prudential management policy on bank credit," Journal of Asian Economics, Elsevier, vol. 100(C).
    • Handle: RePEc:eee:asieco:v:100:y:2025:i:c:s1049007825001034
    DOI: 10.1016/j.asieco.2025.101979
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