Monetary and Macroprudential Policy Rules in a Model with House Price Booms

Alasdair Scott, Pau Rabanal and Prakash Kannan

No 2009/251, IMF Working Papers from International Monetary Fund

Abstract: We argue that a stronger emphasis on macrofinancial risk could provide stabilization benefits. Simulations results suggest that strong monetary reactions to accelerator mechanisms that push up credit growth and asset prices could help macroeconomic stability. In addition, using a macroprudential instrument designed specifically to dampen credit market cycles would also be useful. But invariant and rigid policy responses raise the risk of policy errors that could lower, not raise, macroeconomic stability. Hence, discretion would be required.

Keywords: WP; monetary policy (search for similar items in EconPapers)
Pages: 36
Date: 2009-11-01
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Citations: View citations in EconPapers (79)

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Journal Article: Monetary and Macroprudential Policy Rules in a Model with House Price Booms (2012)
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