Measuring the restrictiveness of (macro)prudential policy: the case of bank capital regulation in Poland

ABSTRACT: The heterogeneity of the banking sector is a vital problem both in case of the conduct of macroprudential policy, as well as the assessment of its effectiveness. To address this issue, we construct a new measure of macroprudential policy restrictiveness, the bank’s free lending capacity ratio (the quotient of a new lending a bank can extend given its capital surplus above capital requirement, and its current volume of loans). We describe its advantages over the measures used in the previous research. Finally, employing first difference GMM method on (dynamic) panel data series, we explain the drivers of changes in lending growth of stock-listed banks in Poland between 2010 and 2020. We show that the free lending capacity ratio displays the most convincing results among the examined variabl

SUBMITTER: Czaplicki M 

PROVIDER: S-EPMC8220423 | biostudies-literature | 2021 Jun

REPOSITORIES: biostudies-literature