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Credit Growth and the Effectiveness of Reserve Requirements and Other Macroprudential Instruments in Latin America


  • International Monetary Fund


Over the past decade policy makers in Latin America have adopted a number of macroprudential instruments to manage the procyclicality of bank credit dynamics to the private sector and contain systemic risk. Reserve requirements, in particular, have been actively employed. Despite their widespread use, little is known about their effectiveness and how they interact with monetary policy. In this paper, we examine the role of reserve requirements and other macroprudential instruments and report new cross-country evidence on how they influence real private bank credit growth. Our results show that these instruments have a moderate and transitory effect and play a complementary role to monetary policy.

Suggested Citation

  • International Monetary Fund, 2012. "Credit Growth and the Effectiveness of Reserve Requirements and Other Macroprudential Instruments in Latin America," IMF Working Papers 12/142, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:12/142

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    References listed on IDEAS

    1. Carlos Montoro & Ramon Moreno, 2011. "The use of reserve requirements as a policy instrument in Latin America," BIS Quarterly Review, Bank for International Settlements, March.
    2. Christian Glocker & Pascal Towbin, 2012. "Reserve Requirements for Price and Financial Stability: When Are They Effective?," International Journal of Central Banking, International Journal of Central Banking, vol. 8(1), pages 65-114, March.
    3. Yanneth Rocío Betancourt & Hernando Vargas, 2008. "Encajes bancarios y la estrategia de inflación objetivo," Borradores de Economia 533, Banco de la Republica de Colombia.
    4. Reinhart, Carmen M & Reinhart, Vincent R, 1999. "On the Use of Reserve Requirements in Dealing with Capital Flow Problems," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 4(1), pages 27-54, January.
    5. Leon, David & Quispe, Zenon, 2010. "El encaje como instrumento no convencional de Política Monetaria," Revista Moneda, Banco Central de Reserva del Perú, issue 143, pages 8-16.
    6. Christian Glocker & Pascal Towbin, 2012. "The Macroeconomic Effects Of Reserve Requirements," EcoMod2012 3850, EcoMod.
    7. Pierre-Richard Agénor & K. Alper & L. Pereira da Silva, 2012. "Sudden Floods, Prudential Regulation and Stability in an Open Economy," Working Papers Series 267, Central Bank of Brazil, Research Department.
    8. G. Terrier & Rodrigo O. Valdes & Camilo E Tovar Mora & Jorge A Chan-Lau & Carlos Fernandez Valdovinos & Mercedes Garcia-Escribano & Carlos I. Medeiros & Man-Keung Tang & Mercedes Vera Martin & W. Chri, 2011. "Policy Instruments to Lean Against the Wind in Latin America," IMF Working Papers 11/159, International Monetary Fund.
    9. Christian Glocker & Pascal Towbin, 2012. "The Macroeconomic Effects of Reserve Requirements," WIFO Working Papers 420, WIFO.
    10. International Monetary Fund, 2011. "Macroprudential Policy; What Instruments and How to Use them? Lessons From Country Experiences," IMF Working Papers 11/238, International Monetary Fund.
    11. R. Gaston Gelos, 2009. "Banking Spreads In Latin America," Economic Inquiry, Western Economic Association International, vol. 47(4), pages 796-814, October.
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