Full length articleLeaning against the wind: Macroprudential policy in Asia

•Macroprudential measures have been utilized quite extensively in Asia.•These policies have been used also as a counter-cyclical tool.•Housing related measures have contributed to reduce credit growth in Asia.•Housing-related tools have helped lower housing price inflation in Asia.•Capital flow management policies have not discouraged portfolio flows to Asia.

In recent years, many countries have adopted macroprudential measures to safeguard financial stability, in particular to deal with the credit and asset price cycles driven by global capital flows. Using a newly constructed database on macroprudential instruments and capital flow measures in 13 Asian economies and 33 economies in other regions for the period 2000-2013, the paper formulates various macroprudential policy indices, aggregating sub-indices on key instruments. Asian economies appear to have made greater use of macroprudential tools, especially housing-related measures, than their counterparts in other regions. The effects of macroprudential policy are assessed through an event study, cross-country macro panel regressions, and bank-level micro panel regressions. The analysis suggests that housing-related macroprudential instruments-particularly loan-to-value ratio caps and housing tax measures-have helped curb housing price growth, credit growth, and bank leverage in Asia.