Macroprudential Regulation in the Post-Crisis Era: Has the Pendulum Swung Too Far?

Juyi Lyu (), Vo Phuong Mai Le, David Meenagh and A. Patrick Minford
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Juyi Lyu: Cardiff Business School

No E2021/5, Cardiff Economics Working Papers from Cardiff University, Cardiff Business School, Economics Section

Abstract: This paper presents an institutional model to investigate the cooperation between a government and a central bank. The former selects the monetary policy and then delegates the organization of macroprudential policy to the latter. Their policy stances are the result of sequential constrained utility maximization. Using indirect inference, we find a set of coefficients that can capture the UK policy stances for 1993-2016. This suggests post-crisis regulation has been overly intrusive. Finally, we show that this regulatory dilemma can be avoided by committing to a highly stabilizing monetary regime that uses QE extensively.

Keywords: Bank regulation; Financial stability; Monetary policy; Public choice theory (search for similar items in EconPapers)
JEL-codes: E52 E58 G28 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2021-03
New Economics Papers: this item is included in nep-ban, nep-cba, nep-mac, nep-mon and nep-upt
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Citations: View citations in EconPapers (3)

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Journal Article: Macroprudential regulation in the post-crisis era: Has the pendulum swung too far? (2021)
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