Analyzing the effectiveness of macroprudential policy and its interaction with the credibility of monetary policy

Macroprudential policy has been increasingly implemented in advanced economies since the Global Financial Crisis of 2008-9 with the aim to strengthen the stability and resilience of the overall financial sector. However, there is not yet a clear understanding of the working and effectiveness of these policy tools. The purpose of this project is therefore to improve our understanding of macroprudential policy effects. First, I will construct intensity-based macroprudential indicators to remedy the lack of a consistent way of quantifying the restrictiveness of macroprudential policy tools in the literature. These refined indices will be used to (i) study the effects of borrower-based macroprudential tools on house price and credit growth in the EU and (ii) analyze whether these tools were more or less effective when complemented by the implementation of other types of macroprudential instruments. Second, I will investigate the interaction of macroprudential and monetary policy. More specifically, I will assess to which extent different types of delegations of macroprudential supervisory powers to central banks affect central bank credibility as a result of conflicts of interests. Finally, I will use Belgian municipality-level data to evaluate the heterogeneous effects of housing-sector-specific macroprudential tools on the housing cycle while taking account of the structural factors that drive house price growth in Belgium.