Impact of Macroprudential Policy Measures on Economic Dynamics: Simulation Using a Financial Macro-econometric Model

This paper uses a financial macro-econometric model to compare and analyze the impact of macroprudential policy measures -- a credit growth restriction, loan-to-value and debt-to-income regulations, and a time-varying capital requirement -- on the economic dynamics through the financial cycle with the asset price bubble. Our analysis shows that although these macroprudential policy measures dampen economic volatility, it is possible that they reduce average economic growth, and the effects on the economic dynamics differ widely among macroprudential policy measures. In addition, the policy effects are changed dramatically by lags in recognizing the state of the economy. Our results also suggest that macroprudential policy measures can help contribute to more stable financial intermediation by raising the resilience of the financial system against risks.