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The interaction of monetary and macroprudential policies, Journal of Money, Credit and Banking 4 (June) (2018). Silvo, Aino

Category

A Peer-reviewed scientific articles

Sub-category

A1 Journal article (refereed), original research

Internal authors

Silvo Aino / Forecasting

All authors as text

Silvo, Aino

Number of authors

Status

Published

Year of publication

2019

Date

03.08.2018

Name of article

The interaction of monetary and macroprudential policies

Name of journal

Journal of Money, Credit and Banking

Volume of issue

Number of issue

4 (June)

Pages

859-894

Abstract

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.

Free text descriptor in Finnish

rahapolitiikka; makrovakauspolitiikka; makrovakaus; luotot;

Free text descriptor in English

monetary policy, macroprudential policy, credit cycles

JEL-codes

E32, E44, E52, G28

ISSN / e-ISSN

0022-2879

Internet addresses

DOI / URN identifier: Doi

Additional information

First published online 3 August 2018.
Published 15 May 2019.