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Macroprudential policy and intra-group dynamics: The effects of reserve requirements in Brazil

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  • Becker, Chris
  • Ossandon Busch, Matias
  • Tonzer, Lena

Abstract

This paper examines whether intra-group dynamics matter for the transmission of macroprudential policy. Using novel bank-level data on the Brazilian banking system, we investigate the effect of reserve requirements targeting headquarter banks' deposit share on credit supply by their municipal bank branches. For identification purposes, we exploit that reserve requirements are adjusted following global economic cycles. Our results reveal a lending channel of reserve requirements for branches whose parent banks are more exposed to targeted deposits. Branch ownership and exposure to internal liquidity are central in explaining the results. Our findings reveal limitations in current macroprudential policy frameworks.

Suggested Citation

  • Becker, Chris & Ossandon Busch, Matias & Tonzer, Lena, 2017. "Macroprudential policy and intra-group dynamics: The effects of reserve requirements in Brazil," IWH Discussion Papers 21/2017, Halle Institute for Economic Research (IWH).
  • Handle: RePEc:zbw:iwhdps:212017
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    1. repec:eee:jmacro:v:60:y:2019:i:c:p:253-274 is not listed on IDEAS
    2. Glocker, Christian, 2019. "Do reserve requirements reduce the risk of bank failure?," MPRA Paper 95634, University Library of Munich, Germany.
    3. Crespo Cuaresma, Jesus & von Schweinitz, Gregor & Wendt, Katharina, 2019. "On the empirics of reserve requirements and economic growth," Journal of Macroeconomics, Elsevier, vol. 60(C), pages 253-274.

    More about this item

    Keywords

    macroprudential regulation; financial intermediation; intra-group dynamics;

    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • F65 - International Economics - - Economic Impacts of Globalization - - - Finance
    • 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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