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Testing the characteristics of macroprudential policies’ differential impact on foreign and domestic banks’ lending in Croatia

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  • Mario Bambulovic

    (Croatian Financial Services Supervisory Agency, Zagreb, Croatia)

  • Miljana Valdec

    (European Central Bank, Frankfurt am Main, Germany)

Abstract

In the aftermath of the 2008 financial crisis, macroprudential measures were labelled as policymakers’ best response to systemic risk and macro-financial imbalances, with their effectiveness still largely unknown due to limited use of such measures. The purpose of this paper is to clarify the potentials and limitations of these measures by evaluating both the immediate and the overall impact of macroprudential policies on banks’ lending to the non-financial private sector in Croatia. The findings reveal the divergent impact of macroprudential measures on banks’ lending with regards to their direction, i.e. tightening or loosening. Policy makers should bear this in mind when opting for a tightening of their policy stance as the reversal of that action may not match the initial impact of its introduction. Additionally, from a policymaker perspective, this paper provides potential evidence of cross-border policy spillovers, which should be taken into account in order to conduct an effective macroprudential policy.

Suggested Citation

  • Mario Bambulovic & Miljana Valdec, 2020. "Testing the characteristics of macroprudential policies’ differential impact on foreign and domestic banks’ lending in Croatia," Public Sector Economics, Institute of Public Finance, vol. 44(2), pages 221-249.
    • Handle: RePEc:ipf:psejou:v:44:y:2020:i:2:p:221-249
    DOI: 10.3326/pse.44.2.4
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    Cited by:

    1. Lorenčič Eva & Festić Mejra, 2022. "The Impact of Macroprudential Policy Instruments on Financial Stability in Southern Europe," Naše gospodarstvo/Our economy, Sciendo, vol. 68(1), pages 25-34, March.
    2. Tihana Škrinjarić, 2023. "Macroprudential stance assessment: problems of measurement, literature review and some comments for the case of Croatia," Working Papers 72, The Croatian National Bank, Croatia.
    3. Tihana Skrinjaric, 2023. "Leading indicators of financial stress in Croatia: a regime switching approach," Public Sector Economics, Institute of Public Finance, vol. 47(2), pages 205-232.

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    More about this item

    Keywords

    bank lending; cross-border policy spillovers; effectiveness; impact study analysis; limitations; macroprudential measures; potential; systemic risk;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • 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

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