Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/216792 
Year of Publication: 
2019
Series/Report no.: 
Economic Working Paper Series No. 1698
Publisher: 
Universitat Pompeu Fabra (upf), Department of Economics and Business, Barcelona
Abstract: 
We show that countercyclical liquidity policy smooths credit supply cycles, with stronger crisis effects. For identification, we exploit the Brazilian supervisory credit register and liquidity policy changes on reserve requirements, that affected banks differentially and have a monetary and prudential purpose. Liquidity policy strongly attenuates both the credit crunch in bad times and high credit supply in booms. Strong economic effects are twice as large during the crisis easing than during the boom tightening. Finally, in crises, liquidity easing: increase less credit supply by more financially constrained banks; and collateral requirements increase substantially, especially by banks providing higher credit supply.
Subjects: 
liquidity
reserve requirements
credit cycles
macroprudential and monetary policy
JEL: 
E51
E52
E58
G01
G21
G28
Document Type: 
Working Paper

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