Study On The Cross-border Spillover Effects Of Macroprudential Policy

In recent years,macroprudential policies have gradually received the attention of regulators.The aim of macroprudential policies is to prevent systemic risk and maintain the stability of financial system.The effectiveness of macroprudential policies is a key consideration.With economic globalization,financial liberalization,and the development of multinational banks,the study on cross-border spillover effects of macroprudential policy is necessary.This paper studies the cross-border spillover effects of macroprudential policies from the perspective of bank risk.Using unbalanced bank-level panel data collected for 384 banks in 27 emerging economies during the period of 2000-2014,this paper establishes the fixed-effect model to investigate the impact of the home country's macroprudential policies on the bank risk of subsidiaries in the host country,and does a series of robustness tests and heterogeneity tests.There are four main findings:(1)The macroprudential policies of the home country can significantly affect the risk of the host country's subsidiaries.Specifically speaking,the tightening macroprudential policies will lead a decrease on subsidiaries' risk in host country,and vice versa;(2)International spillovers of macroprudential policies are heterogeneous across banks.In particular,subsidiaries that are small,less efficient,with high liquid and low capital adequacy are strongly affected by home country's macroprudential policies;(3)Among small subsidiaries,the international spillover effects of easing macroprudential policies are more significant than the tightening macroprudential policies;(4)Compared to others,macroprudential policies related to capital(such as general capital requirements,capital buffers)in home country can more significantly affect the risk of subsidiaries in host country.The contributions of this paper are as follows: Firstly,this paper studies the “cross-border spillover” effects of macroprudential policies.Most literatures focusing on the “national” effects of macroprudential policies have not examined its impacts on financial institutions outside borders.Secondly,this paper studies crossborder spillover effects of macroprudential policies from the perspective of bank risk.Most existing literatures discuss the international spillover effects of macroprudential policies by investigating the impact of macroprudential policies on the overseas credit of banks.This paper tries to measure the cross-border spillovers of macroprudential policies in “quality”,rather than “quantity”,and wishes to make a supplement to the existing literature.Thirdly,The selected subsidiaries in our sample are all located in emerging economies where economic development is relatively fast and banks play an important role in the financial system.Therefore,studying the spillover effects of macroprudential policies to banks in those countries is of great importance.