Comparison of advanced economies’ performance in bubbles mitigation

Abstract

Purpose

This paper aims to analyze the effectiveness of macroprudential and fiscal policies taken from a sample of ten advanced economies in relation to the mitigation of real-estate and credit bubbles by comparing their performance.

Design/methodology/approach

This comparison is elaborated with a seemingly unrelated regression methodology, which allows the assessment of individual countries’ performance and improves the estimation of the dependent variables versus an individual regression.

Findings

The analysis concludes that countercyclical measures have been more effective to control the growth of household debt. Furthermore, this study validates that macroprudential measures focused on the residential sector meet their objective of controlling the growth of house prices, whereas those macroprudential measures with more generic targets are effective to control the growth of household debt.

Originality/value

As opposed to previous panel-regression studies, which have analyzed the performance of macroprudential and fiscal measures in generic terms, this paper compares the performance of these tools in ten advanced economies. Based on the analysis performed, several recommendations are derived for policymakers.

Citation

Gallego Neira, E. and Martínez de Ibarreta, C. (2019), "Comparison of advanced economies’ performance in bubbles mitigation", Journal of Financial Regulation and Compliance, Vol. 27 No. 4, pp. 397-421. https://doi.org/10.1108/JFRC-06-2018-0088