Effects of monetary and macroprudential policies – evidence from inflation targeting economies in the Asia-Pacific region and potential implications for China

Soyoung Kim and Aaron Mehrotra

No GRU_2016_025, GRU Working Paper Series from City University of Hong Kong, Department of Economics and Finance, Global Research Unit

Abstract: We examine the effects of monetary and macroprudential policies in the Asia-Pacific region, where many inflation targeting economies have adopted macroprudential policies in order to safeguard financial stability. Using structural panel vector autoregressions that identify both monetary and macroprudential policy actions, we show that tighter macroprudential policies used to contain credit growth have also had a significant negative impact on macroeconomic aggregates such as real GDP and the price level. The similar effects of monetary and macroprudential policies may suggest a complementary use of the two policies at normal times. However, they could also create challenges for policymakers, especially during times when low inflation coincides with buoyant credit growth.

Keywords: financial stability; price stability; macroprudential policy; monetary policy; panel VAR (search for similar items in EconPapers)
JEL-codes: E58 E61 (search for similar items in EconPapers)
Pages: 22 pages
New Economics Papers: this item is included in nep-cba, nep-mac, nep-mon and nep-sea
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Published in Journal of Money, Credit and Banking, Volume 50, Issue5, August 2018 Pages 967-992

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https://www.cb.cityu.edu.hk/ef/doc/GRU/WPS/GRU%232016-025_AaronKim.pdf (application/pdf)

Related works:
Working Paper: Effects of monetary and macro-prudential policies – evidence from inflation targeting economies in the Asia-Pacific region and potential implications for China (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:cth:wpaper:gru_2016_025

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