Several countries in Central, Eastern and Southeastern Europe used a rich set of prudential instruments in response to last decade’s credit and housing boom and bust cycles. We collect detailed information on these policy measures in a comprehensive database covering 16 countries at a quarterly frequency. We use this database to investigate whether the policy measures had an impact on housing price inflation. Our evidence suggests that some but not all measures did have an impact. These measures were changes in the minimum CAR and non-standard liquidity measures (marginal reserve requirements on foreign funding, marginal reserve requirements linked to credit growth).

Despite much interest among policymakers at the global level since the onset of the recent financial crisis, the econometric evidence on the effectiveness of macroprudential policies (MPPs) available to date is limited, as Galati and Moessner (2011) point out in their recent survey. In Central, Eastern and South-Eastern Europe (CESEE), a significant number of countries went through large and synchronized credit and housing boom-bust cycles during the last decade and macroprudential policies were actively used, thus the region seems fertile ground for an investigation of the effectiveness of these policies. In some CESEE countries, policymakers did not attempt to curb credit expansion through macroprudential policies while in others many instruments were deployed, including capital requirements, loan classification and provisioning rules, reserve or liquidity requirements, and credit eligibility criteria.3 In some cases, policies were tightened late, when the cycle had already turned. In others yet, policies were relaxed during the expansion for exogenous reasons, notably the pressure or desire to harmonize regulation upon joining the European Union. When policymakers took action, they did it through different instruments and with different intensities. This experimentation probably reflected different macroeconomic conditions and institutional settings, but also, possibly, the lack of a well-established rulebook for the use of macroprudential policies. In any case, to the advantage of the researcher, the experience of the CESEE is very rich in terms of policy actions. Our objective in this paper is to contribute to the policy debate on the usefulness of macroprudential policies by exploiting this rich regional experience using a systematic and quantitative approach to the assessment of the effectiveness of macroprudential policy tools.