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The Micro Impact of Macroprudential Policies: Firm-Level Evidence

Dec 31, 2018 | M. Ayyagari, T. Beck, M.S.M. Martinez Peria | IMF
This paper is a first attempt at assessing the effectiveness of macroprudential policies in reducing firm credit and their impact on firms’ investment and sales growth. Combining balance sheet data on 900,000 firms from 48 countries with information on the adoption of macroprudential policies during 2003-2011, the authors find that these policies are associated with lower credit growth. These effects are especially significant for micro, small and medium enterprises (MSMEs) and young firms that, according to the literature, are more financially constrained and bank dependent. Among MSMEs and young firms, those with weaker balance sheets exhibit lower credit growth in conjunction with the adoption of macroprudential policies, suggesting that these policies can enhance financial stability. Finally, their results show that macroprudential policies have real effects, as they are associated with lower investment and sales growth.