Policy measures in the deleveraging process: A macroprudential evaluation

This paper evaluates post-crisis effects of deleveraging policy in Slovenia. Reductions in banks’ credits to nonfinancial sectors were driven by increased collateralization, credit rationing, and a neglect of cash flow performance of banking clients. These jeopardized the normal deleveraging of comp...

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Bibliographic Details
Published in:Journal of policy modeling 2014-03, Vol.36 (2), p.410-432
Main Authors: Bole, Velimir, Prašnikar, Janez, Trobec, Domen
Format: Article
Language:English
Subjects:
Balance sheet crisis
Banks
Cash flow
Central banks
Collateral
Deleveraging
Eastern Europe
Economic growth
Economic performance
Economic policy
Financial services
Financial systems
Illiquidity
Slovenia
Studies
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Summary:This paper evaluates post-crisis effects of deleveraging policy in Slovenia. Reductions in banks’ credits to nonfinancial sectors were driven by increased collateralization, credit rationing, and a neglect of cash flow performance of banking clients. These jeopardized the normal deleveraging of companies with positive cash flows, and rolling over credits, which stifled economic growth. Erroneous sequencing, timing, and calibration of measures steering the deleveraging process generated these processes. Optimal deleveraging process demands that the Central Bank also focus on the stability of the financial system. This task should be a constitutional part of the third macro policy pillar, namely macroprudential policy.
ISSN:0161-8938
1873-8060
DOI:10.1016/j.jpolmod.2014.01.007