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Bank regulations and surges and stops in credit: panel evidence

Research output: Contribution to journal › Article › peer-review

Standard Standard

Bank regulations and surges and stops in credit: panel evidence. / Thornton, John; Vasilakis, Chrysovalantis.
In: Journal of Financial Stability, Vol. 67, 101134, 08.2023.

Research output: Contribution to journal › Article › peer-review

HarvardHarvard

Thornton, J & Vasilakis, C 2023, 'Bank regulations and surges and stops in credit: panel evidence', Journal of Financial Stability, vol. 67, 101134. https://doi.org/10.1016/j.jfs.2023.101134

APA

Thornton, J., & Vasilakis, C. (2023). Bank regulations and surges and stops in credit: panel evidence. Journal of Financial Stability, 67, Article 101134. https://doi.org/10.1016/j.jfs.2023.101134

CBE

Thornton J, Vasilakis C. 2023. Bank regulations and surges and stops in credit: panel evidence. Journal of Financial Stability. 67:Article 101134. https://doi.org/10.1016/j.jfs.2023.101134

MLA

Thornton, John and Chrysovalantis Vasilakis. "Bank regulations and surges and stops in credit: panel evidence". Journal of Financial Stability. 2023. 67. https://doi.org/10.1016/j.jfs.2023.101134

VancouverVancouver

Thornton J, Vasilakis C. Bank regulations and surges and stops in credit: panel evidence. Journal of Financial Stability. 2023 Aug;67:101134. Epub 2023 May 25. doi: 10.1016/j.jfs.2023.101134

Author

Thornton, John ; Vasilakis, Chrysovalantis. / Bank regulations and surges and stops in credit: panel evidence. In: Journal of Financial Stability. 2023 ; Vol. 67.

RIS

TY - JOUR

T1 - Bank regulations and surges and stops in credit: panel evidence

AU - Thornton, John

AU - Vasilakis, Chrysovalantis

PY - 2023/8

Y1 - 2023/8

N2 - Prudential bank regulation complicates monetary policy because it has cyclical effects on the growth of bank credit, which can be a channel through which monetary policy is transmitted to the economy. Employing a panel of 36 advanced and developing countries for the period 1973-2015, we find that changes in regulation have been procyclical with respect to credit surges and counter-cyclical with respect to credit stops. As a result, monetary policy risks being too loose over the credit cycle. The economic effects of prudential regulation on credit have been meaningful given the large-scale bank liberalizations undertaken by many countries. The result is robust to dealing with a wide range of sensitivity tests and endogeneity concerns. In designing regulations, policymakers need to consider transmission mechanisms through which they might affect the real economy and undermine the goals of monetary policy.

AB - Prudential bank regulation complicates monetary policy because it has cyclical effects on the growth of bank credit, which can be a channel through which monetary policy is transmitted to the economy. Employing a panel of 36 advanced and developing countries for the period 1973-2015, we find that changes in regulation have been procyclical with respect to credit surges and counter-cyclical with respect to credit stops. As a result, monetary policy risks being too loose over the credit cycle. The economic effects of prudential regulation on credit have been meaningful given the large-scale bank liberalizations undertaken by many countries. The result is robust to dealing with a wide range of sensitivity tests and endogeneity concerns. In designing regulations, policymakers need to consider transmission mechanisms through which they might affect the real economy and undermine the goals of monetary policy.

U2 - 10.1016/j.jfs.2023.101134

DO - 10.1016/j.jfs.2023.101134

M3 - Article

VL - 67

JO - Journal of Financial Stability

JF - Journal of Financial Stability

SN - 1572-3089

M1 - 101134

ER -