Macroprudential Policies and their impact on Banking Crisis Management in Balkan Region

Abstract

This article aims to study the role of macroprudential affairs in the framework of financial stability. In a narrow perspective this study will deepen in estimating whether macroprudential policies can prevent a possible banking crisis. Many studies have examined the effects of macroprudential policy on credit growth, but few empirical studies have analyzed its effect on the probability of a banking crisis. This paper empirically investigates the effect of macroprudential policy on the probability of a banking crisis. Specifically, using data for 11 Balkan countries from 2006 to 2020, through a probit and logit model it is analyzed the effect of changes in macroprudential policy and a set of other variables on the probability of crisis occurrence. The results highlight the importance of policy coordination between different government bodies to design an appropriate macroprudential policy. The findings of this study state that monetary regulations, such as interest rate and inflation are the main factors that drive the probability of a banking crisis occurrence.