Countercyclical Liquidity Policy and Credit Cycles: Evidence from Macroprudential and Monetary Policy in Brazil

João Barata R Blanco Barroso; Rodrigo Barbone Gonzalez; José-Luis Peydró; Bernardus F Nazar Van Doornik

doi:10.1093/rcfs/cfaf006

Countercyclical Liquidity Policy and Credit Cycles: Evidence from Macroprudential and Monetary Policy in Brazil

João Barata R Blanco Barroso¹; Rodrigo Barbone Gonzalez¹; José-Luis Peydró²; Bernardus F Nazar Van Doornik¹

¹ Banco Central do Brasil , · ² Imperial College London and ICREA ,

The Review of Corporate Finance Studies 2026 open access

Abstract We analyze how countercyclical liquidity policy—via reserve requirements (RRs)—affects the credit cycle. For identification, we exploit supervisory credit register data and RR changes in Brazil made for monetary and macroprudential purposes and affecting banks differently. We find that countercyclical liquidity policy smooths credit supply cycles at the loan and firm levels. The effects of easing during crises are three times stronger than are those of tightening during booms, particularly for low-risk firms. We also explore interest rate policy. Credit supply effects are stronger among high-risk firms and during tightening, when interest rates are more effective than RRs.

DOI: 10.1093/rcfs/cfaf006
Volume: 15 (2)
Pages: 506-548
Language: en
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