Macroprudential regulation in countries of Central and Eastern Europe: experience of financial imbalances, proactivity or protective reaction

Abstract

Is experience of financial imbalances driving intensity of macroprudential policy instruments use? Theoretically – yes, because they support to diminish conflict between price, exchange rate and financial stability. In the same time CEE countries demonstrate more complicated picture. Such countries experienced strong structural determined vulnerability to financial imbalances accumulation. The scale of correction of such imbalances also was tremendous. But empirical analysis doesn’t show that experience of imbalances is a driving force of more intensive use of macroprudential policy instruments. Results of regression analysis based on 18 CEE countries shows that such countries are likely to divide on two groups: those there macroprudential policy is complimenting active structural reforming, and those there such policy is looked like defense reaction on challenges related to general structural weakness.