March 2019 issue contents
Can Macroprudential Measures Make Cross-Border Lending More Resilient? Lessons from the Taper Tantrum

Elöd Takátsa and Judit Temesvaryb


We study the extent to which macroprudential regulatory measures were successful in alleviating the negative shock that the taper tantrum of 2013 imposed on bilateral cross-border lending flows. We use a novel data set combining the BIS stage 1 enhanced banking statistics on bilateral cross-border lending flows with the IBRN's macroprudential database. Our results suggest that macroprudential measures implemented in borrowers' host countries prior to the taper tantrum significantly reduced the negative effect of the tantrum on crossborder lending growth. The shock-mitigating effects of hostcountry macroprudential rules are present both in lending to banks and in lending to non-banks, and are stronger for lending flows to borrowers in advanced economies and to the non-bank sector in general. Source (lending) banking system measures do not affect bilateral lending flows, nor do they enhance the effect of host-country macroprudential measures. Our results imply that policymakers may consider applying macroprudential tools to mitigate international shock transmission through cross-border bank lending.

JEL Code: F34, F42, G21, G38.

Full article (PDF, 45 pages, 582 kb)

a   Bank for International Settlements
b   Federal Reserve Board