Venter, Zoë2020-04-212020-04-212020-04Venter, Zoë (2020). "The interaction between macroprudential policy and financial stability". Instituto Superior de Economia e Gestão – REM Working paper nº 0123 – 20202184-108Xhttp://hdl.handle.net/10400.5/20023In this paper, an index of domestic macroprudential policy tools is constructed and the effectiveness of these tools in controlling credit growth is studied using a dynamic panel data model for the period between 2000 and 2017. The empirical analysis includes two panels namely an EU panel of 27 countries and a Latin American panel of 7 countries, and the paper also looks at a case study of Chile, Colombia, Japan, Portugal and the UK. Our main results find that the cumulative index of macroprudential policy tools does not have a statistically significant impact on credit growth when considering a panel of 27 EU countries. When considering the case of Japan, a tighter capital conservation buffer leads to a decrease in the credit supply. When looking at a panel of 7 Latin American countries, our main results show that a tightening of the capital conservation buffer results in an increase in the credit supply. A tightening of the loan-to-value ratio results in a decrease in the credit supply in the panel of 7 Latin American countries. Lastly, a tightening in the overall macroprudential policy tool stance results in a decrease in credit supply in Japan and an increase in credit supply in Portugal.engMacroprudential PolicyCredit BoomsCapital FlowsFinancial StabilitySystematic RiskEULatin Americaworking paper