Monetary and macroprudential policy: The multiplier effects of cooperation

Arbeitspapier

A BMW model is augmented with a credit market affected by banks' balance sheet and used to assess the dynamic performance of an economy in the face of demand and financial shocks under different assumptions about the interactions between monetary and macroprudential policy. We show that the regulatory bank's capital requirement has a multiplier effect that interferes with monetary policy, thus influencing the credit market and the output gap, and this multiplier effect varies according to the institutional arrangements in which macroprudential and monetary policies are embedded. In particular, we find that cooperation between monetary policy and macroprudential policy delivers the best overall stabilization outcomes in the face of both negative demand and bank equity shocks, if such shocks are not highly persistent. As shock persistence increases, non-cooperation or a simple leaning against the wind monetary policy outperform cooperation. However, adding countercyclical capital buffers in the macroprudential toolkit reinstates the original ranking of institutional arrangements with cooperation dominating overall.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: Working Paper ; No. 110

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Financial Markets and the Macroeconomy ; Monetary Policy ; Central Banks and Their Policies ; Policy Objectives; Policy Designs and Consistency; Policy Coordination ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages ; Financial Institutions and Services: Government Policy and Regulation
• Thema: Financial Frictions ; Monetary Policy ; Macroprudential Policy ; Policy Coordination

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Bassi, Federico ; Boitani, Andrea
• Ereignis: Veröffentlichung
• (wer): Università Cattolica del Sacro Cuore, Dipartimento di Economia e Finanza (DISCE)
• (wo): Milano
• (wann): 2021

Weitere Informationen

• Handle: http://hdl.handle.net/10419/264298
• Letzte Aktualisierung: 20.09.2024, 08:20 MESZ