Monetary and Macroprudential Policy Complementarities: Evidence from European Credit Registers”

Abstract :

We show strong complementarities between monetary and macroprudential policies in influencing credit. We exploit credit register data – crucially from multiple (European) countries and for both corporate and household credit – in conjunction with exogenous monetary policy surprises and indicators of macroprudential policy actions, instrumented using the transposition of EU directives into national law.  Expansive monetary policy boosts lending more in accommodative macroprudential environments. This complementary effect is present for both bank-based and borrower-based macroprudential measures, with borrower-based measures acting primarily through household credit. The complementary effect of monetary and macroprudential policy is stronger for: (i) riskier borrowers; (ii) less capitalized banks (especially when lending to riskier borrowers); (iii) consumer and corporate loans (rather than mortgages); and (iv) more (ex-ante) productive firms (especially for less capitalized banks).