Macroprudential policies in CESEE – an intensity-adjusted approach

We assess the overall intensity with which macroprudential policies were used in eleven Central, Eastern and Southeastern European (CESEE) countries from 1997 until end-2018. To this end, we construct an intensity-adjusted macroprudential policy index, which also allows us to gauge the impact macroprudential measures had on credit growth and housing prices. Our new index reveals that some of the eleven CESEE countries had already intensively implemented macroprudential policy tools before the global financial crisis (GFC), while others became more active in this respect only in its aftermath. The considerable macroprudential tightening evident since 2010 mainly reflects the introduction of borrower-based measures, like loan-to-value (LTV) and debt service-to-income (DSTI) limits, and the implementation of capital buffers. In the empirical assessment, we find that macroprudential measures are associated with lower private sector credit growth, in particular for households. Moreover, borrower-based macroprudential measures tend to have a larger and more robust impact on credit growth than other macroprudential instruments that also include capital- and liquidity-based measures. These findings also hold for the impact of macroprudential measures on house price growth.