The impact of national culture on activation of macroprudential measures

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Abstract
This paper examines the relationship between national culture and the activation of macroprudential policies. Using data on the activation of prudential tools and three cultural dimension measures across 56 countries between 2000 and 2017, we show that national culture significantly influences the use of prudential policy tools. In particular, in countries characterized by stronger preferences for organized frameworks, higher power distance, and greater uncertainty avoidance tend to implement a larger number of macroprudential policies. In contrast, more individualistic societies are associated with lower levels of macroprudential policy activation, reflecting a greater emphasis on liberal values, risk appetite, and resistance to regulatory intervention. These findings are robust to a range of sensitivity analyses and carry policy implications. The results suggest that cultural values shape national policy preferences and should be considered in the design of prudential policies to enhance their effectiveness.

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