The Interaction of Monetary and Macroprudential Policies
I analyze a New Keynesian dynamic stochastic general equilibrium (DSGE) model where the financing of productive investment is affected by a moral hazard problem. I solve for jointly Ramsey-optimal monetary and macroprudential policies. I find that when a financial friction is present in addition to...
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| Veröffentlicht in: | Journal of money, credit and banking credit and banking, 2019-06, Vol.51 (4), p.859-894 |
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| container_end_page | 894 |
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| container_issue | 4 |
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| container_title | Journal of money, credit and banking |
| container_volume | 51 |
| creator | SILVO, AINO |
| description | I analyze a New Keynesian dynamic stochastic general equilibrium (DSGE) model where the financing of productive investment is affected by a moral hazard problem. I solve for jointly Ramsey-optimal monetary and macroprudential policies. I find that when a financial friction is present in addition to the standard nominal friction, the optimal policy can replicate the first-best allocation if the social planner can conduct both monetary and macroprudential policy. Using monetary policy alone is not enough: a policy trade-off between stabilizing inflation and output gap emerges. When policy follows simple rules, the source of fluctuations is relevant for the choice of the appropriate policy mix. |
| doi_str_mv | 10.1111/jmcb.12524 |
| format | Article |
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| ispartof | Journal of money, credit and banking, 2019-06, Vol.51 (4), p.859-894 |
| issn | 0022-2879 1538-4616 |
| language | eng |
| recordid | cdi_proquest_journals_2225598774 |
| source | Wiley Online Library - AutoHoldings Journals |
| subjects | credit cycles E32 E44 E52 Economic models G28 Inflation macroprudential policy Monetary policy Moral dilemmas Moral hazard |
| title | The Interaction of Monetary and Macroprudential Policies |
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