The new, "Non-Core" perspective on macroprudential policy
The growth of non-core liabilities is regarded as the main cause of unstable credit booms which constitute the most serious source of financial instability. In developing economies the credit expansion is mostly related to inflows of short-term speculative capital. The main goal of the paper is to point out the role played by changing liabilities structure in the formation of credit booms. The paper scrutinizes the case of South Korea, which introduced macroprudential regulations already after the Asian financial crisis in 1997. The subprime financial crisis has proved that those tools were not entirely effective, which has led to the introduction of the "second generation" of macroprudential regulations following 2010. The paper analyzes the role of the growth of non-core liabilities in the Korean financial sector in the 2000's, verifying if they contributed to the credit boom on the property market, as well as zombie lending to small and medium enterprises. Finally, using qualitative and quantitative data analysis it assesses the effectiveness of the macro- stabilizing approach towards macro prudential regulation characteristic of the regulatory tools implemented after 2010. (original abstract)
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