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Examining the effectiveness of macroprudential policy in India

Author

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  • Kumar, Sanjiv
  • Prabheesh, K.P.
  • Bashar, Omar

Abstract

This study empirically examines the effectiveness of macroprudential policy (MaPP) on bank credit, housing credit, and housing prices in the Indian context. The study uses structural vector autoregression (SVAR) during 2004M04–2020M03 and reveals that MaPP effectively limits bank credit, housing credit, and housing price appreciations. Furthermore, the study provides evidence of the asymmetric effect of MaPP, implying that MaPP tightening considerably affects bank credit and housing prices, whereas MaPP loosening considerably affects housing credit. Finally, our analysis indicates that MaPP effectively limits housing prices across cities in India.

Suggested Citation

  • Kumar, Sanjiv & Prabheesh, K.P. & Bashar, Omar, 2022. "Examining the effectiveness of macroprudential policy in India," Economic Analysis and Policy, Elsevier, vol. 75(C), pages 91-113.
    • Handle: RePEc:eee:ecanpo:v:75:y:2022:i:c:p:91-113
    DOI: 10.1016/j.eap.2022.04.011
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    More about this item

    Keywords

    Credit; Housing prices; Macroprudential policy; Structural vector autoregression;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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