Journal of Economic Research (Tahghighat- E- Eghtesadi)

Journal of Economic Research (Tahghighat- E- Eghtesadi)

Evaluating the Impact of Macroprudential Policies on Bank Risk-Taking, Evidence from Tehran Stock Exchange

Document Type : Research Paper

Authors
Mahsa Noori Shirazi 1
Hamid Kordbacheh 2
Abolfazl Shah-abadi 3
1 Ph.D Student, Department of Economics, Faculty of Social Sciences and Economics, Alzahra University, Tehran, Iran
2 Associate Professor, Department of Economics, Faculty of Social Sciences and Economics, Alzahra University, Tehran, Iran
3 Professor, Department of Economics, Faculty of Social Sciences and Economics, Alzahra University, Tehran, Iran
10.22059/jte.2022.337398.1008605
Abstract
The purpose of this article is to investigate the effects of macroprudential policies on the banks’ risk-taking in the Iranian banking system. To this aim, based upon a dynamic panel data model and a system generalized method of moment (GMM-SYS), an applied model is presented to analyze the impact of macroprudential policies on the risk-taking of banks listed on the Tehran Stock Exchange for the years 1390-1398. In thsis context, the evaluation and analysis of the potential effects of macroprudential instruments have been studied and evaluated. These instruments consist of countercyclical capital buffers, legal reserve requirements, and loan-to-value ratio restrictions on the banks’ risk appetite behaviors. The results of the study shows that the banks’ risk-taking is reduced by strengthening this macroprudential supervision, The role of credit cycles has been considered more extensively in modeling and estimation of the mechanism of transmission of macroprudential policies. This emphasis has been due to the importance of credit cycles and credit crunch highlighted by the Basel Committee. However, according to the results, no significant relationship was found between credit cycles and risk-taking of the sampled banks. In general, the results display that macroprudential policy has an important role in maintaining the financial stability of the country's banking system and helps reduce the vulnerability of the financial system. Therefore, it is necessary for the regulatory authority of the banking system to pay more attention to the development and employment of precautionary tools.
JEL Classification: C33, E58, G28
Keywords
Macroprudential Policy
Credit Cycle
Bank Risk-Taking
GMM-SYS
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  • Receive Date 14 January 2022
  • Revise Date 18 June 2022
  • Accept Date 19 June 2022