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Global Financial Cycle, Household Credit, and Macroprudential Policies

Author

Listed:
  • Mircea Epure

    (Department of Economics and Business, Universitat Pompeu Fabra, 08005 Barcelona, Spain; UPF Barcelona School of Management, 08008 Barcelona, Spain; Barcelona School of Economics, 08005 Barcelona, Spain)

  • Irina Mihai

    (Bucharest University of Economic Studies, Bucharest 010374, Romania; National Bank of Romania, Bucharest 030031, Romania)

  • Camelia Minoiu

    (Federal Reserve Bank of Atlanta, Atlanta, Georgia 30309)

  • José-Luis Peydró

    (Imperial College London, London SW7 2BX, United Kingdom; Catalan Institution for Research and Advanced Studies–Universitat Pompeu Fabra, 08002 Barcelona, Spain)

Abstract

We show that macroprudential policies dampen the impact of global financial conditions on local bank credit cycles. For identification, we exploit variation in the U.S. volatility index (VIX) and household and business credit registers in an emerging market economy in which banks depend on foreign funding and macroprudential measures vary over the full cycle. Our results suggest that when the VIX is low, tighter macroprudential policies reduce household lending, notably for riskier (foreign currency (FX) and high debt-service-to-income) loans and by banks dependent on foreign funding. Moreover, they increase (less regulated) local currency lending to real estate firms. Such periods are associated with less subsequent total lending to households and firms and with a lower share of FX loans at the local level. Consistently, when the VIX is low, tighter macroprudential policies dampen house prices and economic activity.

Suggested Citation

  • Mircea Epure & Irina Mihai & Camelia Minoiu & José-Luis Peydró, 2024. "Global Financial Cycle, Household Credit, and Macroprudential Policies," Management Science, INFORMS, vol. 70(11), pages 8096-8115, November.
    • Handle: RePEc:inm:ormnsc:v:70:y:2024:i:11:p:8096-8115
    DOI: 10.1287/mnsc.2024.4981
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    Cited by:

    1. Karlström, Peter, 2025. "Macroprudential policy and systemic risk: The role of corporate and household credit booms," Journal of Financial Stability, Elsevier, vol. 78(C).
    2. Georgescu, Oana-Maria & Martín, Diego Vila, 2021. "Do macroprudential measures increase inequality? Evidence from the euro area household survey," Working Paper Series 2567, European Central Bank.
    3. Georgia Bush & Tomás Gómez & Alejandro Jara & David Moreno & Konstantin Styrin & Yulia Ushakova, 2021. "Macroprudential policy and the inward transmission of monetary policy: The case of Chile, Mexico, and Russia," Review of International Economics, Wiley Blackwell, vol. 29(1), pages 37-60, February.
    4. Banti, Chiara & Phylaktis, Kate, 2019. "Global liquidity, house prices and policy responses," Journal of Financial Stability, Elsevier, vol. 43(C), pages 79-96.
    5. Sjoerd Van Bekkum & Marc Gabarro & Rustom M. Irani & José-Luis Peydró, 2019. "Take It to the limit? The effects of household leverage caps," Economics Working Papers 1682, Department of Economics and Business, Universitat Pompeu Fabra, revised Feb 2022.
    6. Knut Are Aastveit & Ragnar Enger Juelsrud & Ella Getz Wold, 2021. "The household effects of mortgage regulation," Working Papers No 07/2021, Centre for Applied Macro- and Petroleum economics (CAMP), BI Norwegian Business School.
    7. Khwazi Magubane, 2025. "Determinants of Financial Stability and Development in South Africa: Insights from a Quantile ARDL Model of the South African Financial Cycle," JRFM, MDPI, vol. 18(9), pages 1-34, September.
    8. Fatma Pinar Erdem Kucukbicakci & Etkin Ozen & Ibrahim Unalmis, 2020. "Are Macroprudential Policies Effective Tools to Reduce Credit Growth in Emerging Markets?," World Journal of Applied Economics, WERI-World Economic Research Institute, vol. 6(1), pages 73-89, June.
    9. Erlend Nier & Radu Popa & Maral Shamloo & Liviu Voinea, 2019. "Debt Service and Default: Calibrating Macroprudential Policy Using Micro Data," IMF Working Papers 2019/182, International Monetary Fund.
    10. Becker, Chris & Ossandon Busch, Matias & Tonzer, Lena, 2021. "Macroprudential policy and intra-group dynamics: The effects of reserve requirements in Brazil," Journal of Corporate Finance, Elsevier, vol. 71(C).

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    Keywords

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    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • F30 - International Economics - - International Finance - - - General
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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