Description

This paper presents a detailed account of the rich set of macroprudential measures taken in
 four Southeastern European countries—Bulgaria, Croatia, Romania, and Serbia—during
 their synchronized boom and bust cycles in 2003–12, and assesses their effectiveness. We
 find that only strong measures helped contain domestic credit growth, the share of foreigncurrency-
 denominated loans provided by the domestic banking sector, or the domestic
 banking sector’s reliance on foreign borrowing during the boom years. We also find that
 circumvention via direct external borrowing often fully offset the effectiveness of these
 strict measures, and thatmeasures taken during the bust had no discernible impact. We
 conclude that (i) proper calibration of macroprudential measures is of the essence; (ii) only
 strong, broad-based macroprudential measures can contain credit booms; (iii) econometric
 studies of macroprudential policy effectiveness should focus on measures rather than on
 instruments (i.e. classes of measures) and in so doing allow for possible non-linear and
 state-contingent effects.

More publications in this series: Working Papers

More publications by: Dilyana Dimova ; Piyabha Kongsamut ; Jérôme Vandenbussche