Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/216795 
Year of Publication: 
2019
Series/Report no.: 
Economic Working Paper Series No. 1650
Publisher: 
Universitat Pompeu Fabra (upf), Department of Economics and Business, Barcelona
Abstract: 
We analyze the impact of reserve requirements on the supply of credit to the real sector. For identification, we exploit a tightening of reserve requirements in Uruguay during a global capital inflows boom, where the change affected more foreign liabilities, in conjunction with its credit register that follows all bank loans granted to non-financial firms. Following a difference-in-differences approach, we compare lending to the same firm before and after the policy change among banks differently affected by the policy. The results show that the tightening of the reserve requirements for banks lead to a reduction of the supply of credit to firms. Importantly, the stronger quantitative results are for the tightening of reserve requirements to bank liabilities stemming from non-residents. Moreover, more affected banks increase their exposure into riskier firms, and larger banks mitigate the tightening effects. Finally, the firm-level analysis reveals that the cut in credit supply in the loan-level analysis is binding for firms. The results have implications for global monetary and financial stability policies
Subjects: 
macroprudential policy
reserve requirements
JEL: 
E51
E52
F38
G21
G28
Document Type: 
Working Paper

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