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Open AccessArticle

Macroprudential Policy, Credit Cycle, and Bank Risk-Taking

School of Finance, Renmin University of China, Beijing 100872, China
Donlinks School of Economics and Management, University of Science and Technology Beijing, Beijing 100083, China
Author to whom correspondence should be addressed.
Sustainability 2018, 10(10), 3620;
Received: 31 August 2018 / Revised: 2 October 2018 / Accepted: 4 October 2018 / Published: 10 October 2018
(This article belongs to the Special Issue Application of Time Series Analyses in Business)
This paper constructs a theoretical model to analyze the effect of macroprudential policies (MPPs) on bank risk-taking. We collect a data set of 231 commercial banks in China to empirically test whether macroprudential tools, including countercyclical capital buffers, reserve requirements, and caps on loan-to-value, can affect bank risk-taking behaviors by using the dynamic unbalanced panel system generalized method of moment (SYS-GMM). The results provide further evidence on the important role of MPPs in maintaining financial stability, which helps mitigate financial system vulnerabilities. Bank risk-taking will be decreased with the strengthening of macroprudential supervision, which greatly benefits the resilience and the sustainability of bank sector. Moreover, the credit cycle has a magnifying role on MPPs’ effect on bank risk-taking. Reducing risks in bank loans requires a further slowing of credit growth, which is necessary to ensure sustainable growth in a bank system, or more ambitiously, to smooth financial booms and busts. The results survive robustness checks under alternative estimation methods and alternative proxies of bank risk-taking and MPPs. View Full-Text
Keywords: macroprudential policy; credit cycle; bank risk-taking; SYS-GMM macroprudential policy; credit cycle; bank risk-taking; SYS-GMM
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Zhang, X.; Li, F.; Li, Z.; Xu, Y. Macroprudential Policy, Credit Cycle, and Bank Risk-Taking. Sustainability 2018, 10, 3620.

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