Page 257 - Special Topic Session (STS) - Volume 3

STS543 Veronica B. B. et al.
maintaining price stability. This has helped enhance monetary policy’s
credibility in maintaining price stability. In turn, central banks recognize that
financial stability policy interacts and influence banking regulations as well as
monetary policy actions, implying that central banks need to consider the
extent of policy interactions.
Many studies have defined macroprudential policy as a set of measures
that prevent or mitigate systemic risk, either over time or across institutions
and markets. There are variations on the national/institutional definitions of
what constitutes macroprudential policy, but these often hover around these
themes - the use of instruments or tools that either increase the resilience of
the financial system or constrain systemic risks that are often associated with
financial booms. This study covers a more comprehensive set of domestic
macroprudential policies classified by instrument, such as those related to
credit (or asset-side instruments), liquidity which address the build-up of
liquidity and foreign-exchange risks associated with lending booms, capital,
banks’ reserve requirements on domestic deposits and deposit substitutes,
structural or interconnectedness (Orsmond and Price 2016), and currency
(Bruno et al. 2015). This study then estimates the effectiveness of these policies
in curbing growth of real bank loan commitments to non-financial borrowers
who are acquiring new residential properties using an unbalanced panel data
regression from 2014 to 2017.
In the Philippines, a detailed study on the effectiveness of the use of
prudential policies on the growth of bank credit is yet to be completed. Most
of the studies are part of a bigger study or across jurisdictions. In particular,
the latest study by Bayangos (2017) found that after controlling for episodes
of sterilization of capital inflows across nine Asian emerging market
economies for the period 2004-2015, capital inflow restrictions and domestic
macroprudential policy are effective in curbing overall real bank and real
housing credit and real house prices. Moreover, monetary policy tightening
complements tight domestic macroprudential policy in restraining
movements in real bank credit and real house prices.
This study is broadly related to a growing area of empirical research on
financial stability. The empirical literature on the effectiveness of domestic
macroprudential policies in dampening credit cycles across economies
remains relevant since the Global Financial Crisis (GFC). In recent past years,
empirical evidence of the efficiency of macroprudential policies in restraining
excessive credit growth has expanded to include bank-level data and credit
registry data. However, credit registry data in many countries, including the
Philippines, are limited and confidential. This study uses bank-level data from
residential property loan reports involving 101 universal/commercial banks
(U/KBs) and thrift banks (TBs).

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