Friend or foe? The impact of macroprudential policy on economic growth

ABSTRACT

In this paper, we examine the impact of macroprudential policy on economic growth. The results show that the implementation of macroprudential policies contributes to fostering economic growth, especially in the period following the onset of the global financial crisis. In particular, we show that tightening loan loss provisions, loan-to-value, lending restriction, liquidity requirements and systemically important financial institutions measures all lead to higher economic growth. However, we also find that, while tightening macroprudential policy is generally beneficial for the economy, excessive tightening policy can exert a negative growth impact.

KEYWORDS:

• Macroprudential policy
• economic growth
• two-step system GMM

JEL CODES:

• E58
• G28
• O4

Acknowledgments

This research is funded by VNU University of Economics and Business under grand number: BBQT.09.2022.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1. To enhance the robustness of our findings, we have re-estimated the baseline models using alternative model specifications, specifically pooled OLS, random effects, and fixed effects. The outcomes of these additional analyses can be found in Appendix 2, further bolstering the validity and reliability of our results.

2. We exclude the seventeenth instrument (Other) from our analysis because it does not imply specific nature and objective.

Additional information

Funding

This work was supported by the VNU University of Economics and Business.