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Board of Governors of the Federal Reserve System (US)
Finance and Economics Discussion Series
Can Macroprudential Measures Make Cross-Border Lending More Resilient? Lessons from the Taper Tantrum
We study the effect of macroprudential measures on cross-border lending during the taper tantrum, which saw a strong slowdown of cross-border bank lending to some jurisdictions. We use a novel dataset 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 cross-border lending growth. The shock-mitigating effect of host country macroprudential rules are present both in lending to banks and non-banks, and are strongest 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.
Cite this item
Elod Takats & Judit Temesvary, Can Macroprudential Measures Make Cross-Border Lending More Resilient? Lessons from the Taper Tantrum, Board of Governors of the Federal Reserve System (US), Finance and Economics Discussion Series 2017-123, 18 Dec 2017.
- 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
Keywords: Diff-in-diff analysis ; Taper tantrum ; Cross-border claims ; Macroprudential policy
This item with handle RePEc:fip:fedgfe:2017-123
is also listed on EconPapers
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