Staff Working Paper No. 1,080
By Kristina Bluwstein and Alba Patozi
We construct a new data set of macroprudential policy announcements for the United Kingdom and estimate their effect on systemic risk, using a high-frequency identification approach. First, by examining a sample of the largest UK-listed banks, we identify macroprudential policy announcement shocks that were unanticipated by the financial markets. Second, we study the effects of market-based macroprudential policy surprises on systemic risk in a local projection framework. We find that tighter than expected macroprudential policy announcements contribute to a substantial reduction in perceived systemic risk in the short run, with effects persisting for several months. The reduction is mostly attributed to the reaction in equity and bond markets.
The effects of macroprudential policy announcements on systemic risk
