No. 499 - Should the CCyB be enhanced with a sectoral dimension? The case of Italy

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by Roberta Fiori and Claudia PacellaJune 2019

The paper investigates whether there is sufficient empirical support in Italy for the introduction of a sectoral countercyclical capital buffer (CCyB) in the macroprudential framework.

The paper shows that a sectoral CCyB can be a useful addition to the macroprudential framework as both the timing for activation and the size of the capital buffer could differ when accounting for the sectoral dimension of the credit-to-GDP gap. The synchronicity of sectoral credit cycles, their contribution to systemic stress and the prudential requirement associated with their risk exposures differ quite significantly.