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Journal of Political Economy Vol. 125 No. 6 2017

Macroprudential Policy, Countercyclical Bank Capital Buffers, and Credit Supply: Evidence from the Spanish Dynamic Provisioning Experiments

Gabriel Jiménez1; Steven Ongena2,3; José-Luis Peydró4,5,6,2,7,8; Jesús Saurina1

1 Bank of Spain · 2 Centre for Economic Policy Research · 3 Swiss Finance Institute · 4 Institució Catalana de Recerca i Estudis Avançats · 5 Universitat Pompeu Fabra · 6 Centre de Recerca en Economia Internacional · 7 Barcelona School of Economics · 8 Imperial College London

Abstract

To study the impact of macroprudential policy on credit supply cycles and real effects, we analyze dynamic provisioning. Introduced in Spain in 2000, revised four times, and tested in its countercyclicality during the crisis, it affected banks differentially. We find that dynamic provisioning smooths credit supply cycles and, in bad times, supports firm performance. A 1 percentage point increase in capital buffers extends credit to firms by 9 percentage points, increasing firm employment (6 percentage points) and survival (1 percentage point). Moreover, there are important compositional effects in credit supply related to risk and regulatory arbitrage by nonregulated and regulated but less affected banks.

DOI
10.1086/694289
Volume
125
Issue
6
Pages
2126-2177
Language
en
Sources
crossref bibtex:phds-export.bib openalex

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