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Can Macroprudential Measures Make Cross-Border Lending More Resilient? Lessons from the Taper Tantrum

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  • Elöd Takáts

    (Bank for International Settlements)

  • Judit Temesvary

    (Federal Reserve Board)

Abstract

We study the extent to which macroprudential regulatory measures were successful in alleviating the negative shock that the taper tantrum of 2013 imposed on bilateral cross-border lending flows. We use a novel data set combining the BIS stage 1 enhanced banking statistics on bilateral cross-border lending flows with the IBRN's macroprudential database. Our results suggest that macroprudential measures implemented in borrowers' host countries prior to the taper tantrum significantly reduced the negative effect of the tantrum on crossborder lending growth. The shock-mitigating effects of hostcountry macroprudential rules are present both in lending to banks and in lending to non-banks, and are stronger for lending flows to borrowers in advanced economies and to the non-bank sector in general. Source (lending) banking system measures do not affect bilateral lending flows, nor do they enhance the effect of host-country macroprudential measures. Our results imply that policymakers may consider applying macroprudential tools to mitigate international shock transmission through cross-border bank lending.

Suggested Citation

  • Elöd Takáts & Judit Temesvary, 2019. "Can Macroprudential Measures Make Cross-Border Lending More Resilient? Lessons from the Taper Tantrum," International Journal of Central Banking, International Journal of Central Banking, vol. 15(1), pages 61-105, March.
  • Handle: RePEc:ijc:ijcjou:y:2019:q:1:a:2
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    References listed on IDEAS

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    Cited by:

    1. Żochowski, Dawid & Franch, Fabio & Nocciola, Luca, 2019. "Cross-border effects of prudential regulation: evidence from the euro area," Working Paper Series 2285, European Central Bank.
    2. Ashima Goyal & Akhilesh K. Verma, 2020. "Cross border flows, financial Intermediation and interactions of policy rules in a small open economy model," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2020-008, Indira Gandhi Institute of Development Research, Mumbai, India.
    3. Kristin J. Forbes, 2020. "The International Aspects of Macroprudential Policy," NBER Working Papers 27698, National Bureau of Economic Research, Inc.
    4. Coman, Andra & Lloyd, Simon, 2019. "In the face of spillovers: prudential policies in emerging economies," Bank of England working papers 828, Bank of England.
    5. Bussière, Matthieu & Cao, Jin & de Haan, Jakob & Hills, Robert & Lloyd, Simon & Meunier, Baptiste & Pedrono, Justine & Reinhardt, Dennis & Shina, Sonalika & Sowerbutts, Rhiannon & Styrin, Konstantin, 2020. "The interaction between macroprudential policy and monetary policy: overview," Bank of England working papers 886, Bank of England.
    6. Elod Takats & Judit Temesvary, 2019. "How does the interaction of macroprudential and monetary policies affect cross-border bank lending?," Finance and Economics Discussion Series 2019-045, Board of Governors of the Federal Reserve System (U.S.).
    7. Albertazzi, Ugo & Barbiero, Francesca & Marqués-Ibáñez, David & Popov, Alexander & Rodriguez d’Acri, Costanza & Vlassopoulos, Thomas, 2020. "Monetary policy and bank stability: the analytical toolbox reviewed," Working Paper Series 2377, European Central Bank.

    More about this item

    JEL classification:

    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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