Capital and Liquidity Buffers and the Resilience of the Banking System in the Euro Area

Research background: Although macroprudential instruments increase financial stability, it is necessary to test how they affect the overall economic recovery after a global financial crisis. In the post-crisis period, the real sector needed a strong injection of capital in order to be able to start recovery and to encourage economic growth. At the same time, most of the countries introduced strict regulatory measures that strengthen bank capital and the liquidity base. From the standpoint of the financial sector stability, these measures contributed to the overall financial stability, but at the same time, these measures hold up the bank credit activity. Purpose of the article: This paper analyses the impact of macroprudential instruments on the bank credit activity toward the non-financial sector. The analysis is made by using the Granger Causality Test and the ARLDS Bounds Test. Methods: The research was conducted for the period of 2000 – 2019, based on the data of the Croatian National Bank and the Croatian Bureau of Statistics using logarithmic quarterly data. The analysis is made by using the Granger Causality Test and the ARLDS Bounds Test. Findings & Value added: The results confirm the thesis that additional macroprudential measures decrease the bank credit activity toward the real sector, which slows down the real sector recovery and extends the downturn in the business cycle. On the other hand, the macroprudential measures increase the financial stability of the whole economy, which is positive for future investments and recovery of the real sector.

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Effectiveness of Macroprudential Policies under Maturity Mismatch

Yang

2019

Emerging Markets Finance and Trade

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Capital and Liquidity Buffers and the Resilience of the Banking System in the Euro Area

Cited by 4 publications

References 34 publications

New Solutions in the European Financial Market and their Impact on the Polish Market

New Solutions in the European Financial Market and their Impact on the Polish Market

Improving the Resilience of Banking System in Small Open Economy: Is Macroprudential Policy Efficient?

Effectiveness of Macroprudential Policies under Maturity Mismatch

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