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Countercyclical Liquidity Policy and Credit Cycles: Evidence from Macroprudential and Monetary Policy in Brazil

João Barata Ribeiro Blanco Barroso et al.

Review of Corporate Finance Studies2025https://doi.org/10.1093/rcfs/cfaf006preprint
AJG 3ABDC A*
Weight
0.40

Abstract

We analyze how countercyclical liquidity policy—via reserve requirements (RRs)—affects the credit cycle. For identification, we exploit supervisory credit register data and RR changes in Brazil made for monetary and macroprudential purposes and affecting banks differently. We find that countercyclical liquidity policy smooths credit supply cycles at the loan and firm levels. The effects of easing during crises are three times stronger than are those of tightening during booms, particularly for low-risk firms. We also explore interest rate policy. Credit supply effects are stronger among high-risk firms and during tightening, when interest rates are more effective than RRs.

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https://doi.org/https://doi.org/10.1093/rcfs/cfaf006

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@article{joão2025,
  title        = {{Countercyclical Liquidity Policy and Credit Cycles: Evidence from Macroprudential and Monetary Policy in Brazil}},
  author       = {João Barata Ribeiro Blanco Barroso et al.},
  journal      = {Review of Corporate Finance Studies},
  year         = {2025},
  doi          = {https://doi.org/https://doi.org/10.1093/rcfs/cfaf006},
}

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Countercyclical Liquidity Policy and Credit Cycles: Evidence from Macroprudential and Monetary Policy in Brazil

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Evidence weight

0.40

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.25 × 0.4 = 0.10
M · momentum0.50 × 0.15 = 0.07
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

† Text relevance is estimated at 0.50 on the detail page — for your query’s actual relevance score, open this paper from a search result.