Macroprudential policy, economic crises and economic growth

Slow global economic growth, frequent fluctuations in international financial markets, and increasing wealth disparity have become common concerns facing the globe. Risk prevention and stable economic growth have become the basic requirements for high-quality economic development, and macroprudential policy tools are at the center of these two policy objectives. This paper constructs a unified empirical analysis framework and incorporates the two policy objectives of preventing economic crises and stabilizing economic growth to analyze the comprehensive effects of macroprudential policy. Using data from 100 economies from 2000 to 2017, we find that the impact of macroprudential policy on economic growth can be divided into direct and indirect channels. For all economies, macroprudential policy can indirectly promote economic growth by suppressing economic crises, but its direct effect is heterogeneous. Furthermore, the heterogeneity of the direct effect of macroprudential policy on economic growth is mainly generated through channels such as investment, loan interest rates, and leverage. In high-income economies, the direct impact of macroprudential policy on economic growth is not obvious; in middle- and high-income economies, it promotes economic growth by influencing investment and leverage; in low- and lower-middle-income economies, it hinders economic growth through investment and loan interest rates.