Macroprudential Policy and Bank Systemic Risk: Does Inflation Targeting Matter?

Download or read book Macroprudential Policy and Bank Systemic Risk: Does Inflation Targeting Matter? written by Mohamed Belkhir and published by International Monetary Fund. This book was released on 2023-06-02 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper investigates macroprudential policy effects on bank systemic risk and the role of inflation targeting in such effects. Using bank-level data for 45 countries comprising various monetary and exchange rate regimes, our regime-dependent dynamic panel regression results point to complementarities between monetary and macroprudential policies. We find that the tightening of most macroprudential tools—including DSTI and LTV limits, and capital requirements—reduces bank systemic risk further under inflation targeting. Our findings lend credence to the view that inflation targeting strengthens macroprudential policy roles in mitigating financial stability risks.