The transmission channels of monetary, macro- and microprudential policies and their interrelations

Andreas Beyer (andreas.beyer@ecb.int), Giulio Nicoletti, Niki Papadopoulou, Patrick Papsdorf, Gerhard Rünstler (gerhard.ruenstler@ecb.europa.eu), Claudia Schwarz, João Sousa and Olivier Vergote

No 191, Occasional Paper Series from European Central Bank

Abstract: This paper investigates the interrelations between monetary macro- and microprudential policies. It first provides an overview of the three policies, starting with their main instruments and objectives. Monetary policy aims at maintaining price stability and promoting balanced economic growth, macroprudential policies aim at safeguarding the stability of the overall financial system, while microprudential policies contribute to the safety and soundness of individual entities. Subsequently, the paper provides a simplified description of their respective transmission mechanisms and analyses the interactions between them. A conceptual framework is first presented on the basis of which the analysis of the interactions across the different policies can be demonstrated in a stylised manner. These stylised descriptions are then further complemented by model-based simulations illustrating the significant complementarities and interactions between them. Finally, the paper concludes that from a conceptual point of view there are numerous areas of interaction between the policies. These create scope for synergies, which can be reaped by sharing information and expertise across the various policy areas. JEL Classification: E58, G28

Keywords: banking; central bank policies; DSGE models; financial regulation; non-standard measures (search for similar items in EconPapers)
Date: 2017-05
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
Note: 336354
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (22)

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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbops:2017191

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