Macroprudential, Monetary Policy Synergies and Credit Supply: Evidence from Matched Bank‐Firm Loan‐Level Data in Brazil

This paper estimates the impact of countercyclical reserve requirements (RRs) on credit. We explore differential bank exposure to RRs in matched loan‐level data from Brazil, where RRs have been used extensively to pursue financial stability. We find that, after tightening RRs, more exposed banks reduce credit to firms; after loosening, they expand credit supply. During booms, private domestic banks with lower capital are more responsive to a tightening of RRs and to a simultaneous tightening of the short‐term policy rate. We also find that higher levels of economic policy uncertainty weaken this channel, and real effects in employment are modest.