Author: Mircea Epure, Irina Mihai, Ms. Camelia Minoiu, and José-Luis Peydró
We analyze the effects of macroprudential policies on local bank credit cycles and interactions with
international financial conditions. For identification, we exploit the comprehensive credit register
containing all bank loans to individuals in Romania, a small open economy subject to external shocks,
and the period 2004-2012, which covers a full boom-bust credit cycle when a wide range of
macroprudential measures were deployed. Although household leverage is known to be a key driver
of financial crises, to our knowledge this is the first paper that employs a household credit register to
study leverage and macroprudential policies over a full economic cycle. Our results show that tighter
macroprudential conditions are associated with a significant decline in household credit, with
substantially stronger effects for foreign currency (FX) loans than for local currency loans. The
effects on FX loans are higher for: (i) ex-ante riskier borrowers proxied by higher debt-service-toincome
ratios and (ii) banks with greater exposure to foreign funding. Moreover, tighter
macroprudential policy has stronger dampening effects on FX lending when global risk appetite is
high and foreign monetary policy is expansionary. Finally, quantitative effects are in general larger
for borrower rather than lender macroprudential policies.
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