Does macro-prudential regulation lead to low interest rate? An empirical analysis based on the transnational panel model

Based on a simple theoretical analysis, this paper constructs a transnational panel model based on the macroeconomic variable data of 131 countries from 2007 to 2020 for empirical analysis, so as to systematically explore the potential impact of macro-prudential policy regulation on the evolution of interest rates. It is found that the nominal interest rate of developed economies is closer to the lower bound of interest rate than that of underdeveloped economies, and the implementation of macro-prudential policies in the world generally shows a tightening trend, and the tightening degree of macro-prudential policies in developed economies is higher. Macro-prudential regulation has significantly exacerbated the evolution of global low interest rates, but the interest rate evolution of different types of economies is heterogeneous under the influence of macro-prudential regulation, especially in developed economies. Based on these insights, the paper proposes several policy recommendations: firstly, strengthen the precision of the implementation of macro-prudential policies to avoid “one-size-fits-all” policy implementation; secondly, refine macro-prudential policy regulation to be more scientific and prevent policy overshoots that could inadvertently harm the real economy; thirdly, attach great importance to the potential constraints of the low interest rate environment, and use diversified means to get rid of the lower bound of the nominal interest rate.