Leaning against the wind: Effects of macroprudential policy on sectoral

Abstract. Use of macroprudential policies in recent years has gained relevance in different economies. As a result of the financial crisis in 2008, this instrument was useful in emerging economies to reduce the effects of the adverse international context. The relationship between financial intermediation and the real sector is positive, in response to shocks in productive credit the sectoral growth is 0.15pp in 2016. Likewise, the modification of the reserve requirement rate can provide or with draw liquidity from the financial system, in the first case, the objective is to increase portfolio placement, which affects the development of productive sectors. Therefore, there is a need to evaluate the effect of changes in the reserve requirement rateon sectoral growth in Bolivia, which was offset by the financial cycle because episodes of Credit Crunch affect the real sector (the economic cycle is amplified to the downside). The methodologies used are the Fixed Effects (FE), Random Effects (RA) and Panel Autoregresive Vectors (Panel-VAR) and recursive versions of them. The positive effects of the macroprudential policy and changes in the position that this instrument had over time, depending on the financial cycle, Leaning Against the Wind. Reserve requirement ratedecreasesof the national currency has positive impact on sectoral growth and tests with recursive versions shows positive effects and increase of credit towards the sectoral activity.Keywords. Reserve requirements, Interest rate, Fixed effects (EF), Random effects (RE), Panel VAR, Recursive estimation, Leaning against the wind.JEL. C50, E51, E52