Macroprudential Regulation and the Monetary Transmission Mechanism

Pierre-Richard Agénor and Luiz Awazu Pereira da Silva ()

No 254, Working Papers Series from Central Bank of Brazil, Research Department

Abstract: This paper presents a simple dynamic macroeconomic model of a bank-dominated financial system that captures some of the key credit market imperfections commonly found in middle-income countries. The model is used to analyze the interactions between monetary and macroprudential policies, involving, in the latter case, changes in reserve requirements and the imposition of an upper limit on banks’ leverage ratio. Policy implications are also discussed, in the context of the post-crisis debate on the use of macroprudential tools. The analysis shows that understanding how these tools operate is essential because they may alter, possibly in substantial ways, the monetary transmission mechanism.

Date: 2011-11
New Economics Papers: this item is included in nep-ban, nep-cba, nep-mac and nep-mon
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Citations: View citations in EconPapers (9)

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Related works:
Journal Article: Macroprudential regulation and the monetary transmission mechanism (2014)
Working Paper: Macroprudential Regulation and the Monetary Transmission Mechanism (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:bcb:wpaper:254

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