Álvaro Fernández-Gallardo Romero

Job market
University of origin:
Universidad de Castilla La Mancha (Spain)

Admission year: 2019
email:: alvaro.fernandez@ua.es
Office: 0031PS042
Ext.: 2144

The Transmission of Macroprudential Policy in the Tails: Evidence from a Narrative Approach

Abstract: We estimate the causal effects of macroprudential policies on the entire distribution of GDP growth for a panel of advanced European economies using a narrative-identification strategy in a quantile-regression framework. While macroprudential policy has near-zero effects on the centre of the GDP-growth distribution, tighter policy brings benefits by reducing the variance of future growth, significantly boosting the left tail (i.e., GDP-at-Risk) while simultaneously reducing the right. Assessing a range of channels through which these effects materialise, we find that macroprudential policy particularly operates through `credit-at-risk’: it reduces the right tail of future credit growth, dampening credit booms, in turn reducing the likelihood of extreme GDP-growth outturns. Overall, our results provide novel evidence about the causal effects of macroprudential policy on the distribution of future macroeconomic outcomes.

Iván Payá
University of Alicante

Simon Lloyd
Bank of England

Gabriel Pérez-Quirós
Bank of Spain