Following the Great Recession, many central banks have tightened macroprudential policy (MaPP). Years later, their macroprudential stance remains tight in an effort to maintain financial stability. In our research, we find that MaPP reduces household consumption by increasing savings and decreasing borrowing. At the same time, we find that MaPP leads to higher firm investment, at least, in the long run. There is also evidence that MaPP leads to a redistribution of wealth. Finally, we show that these effects depend mainly on the type of policy instrument and the country’s stage of development.
|Author:||Andre; Zoe, Teixeira; Venter|
|No. of pages:||3|