Macroprudential Regulation Versus Mopping Up After the Crash

Olivier Jeanne and Anton Korinek

No 18675, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We study the interplay of optimal ex-ante (macroprudential) and ex-post (monetary or fiscal stimulus) measures to respond to systemic financial crises in a tractable model of fire sales. We find that it is generally optimal to use both, rejecting the Greenspan doctrine to only intervene ex post. Optimal macroprudential policy resolves the time consistency problems associated with stimulus measures. However, if macroprudential policy is suboptimal, for example because of circumvention, only monetary stimulus should be used, and it is desirable to commit to smaller stimulus. Furthermore, accumulating macroprudential tax revenue in a bailout fund used for stimulus measures is undesirable.

JEL-codes: E44 G18 H23 (search for similar items in EconPapers)
Date: 2013-01
New Economics Papers: this item is included in nep-cba and nep-mac
Note: CF EFG IFM
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Citations: View citations in EconPapers (86)

Published as Olivier Jeanne & Anton Korinek, 2020. "Macroprudential Regulation versus mopping up after the crash," The Review of Economic Studies, vol 87(3), pages 1470-1497.

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Journal Article: Macroprudential Regulation versus mopping up after the crash (2020)
Working Paper: Macroprudential Regulation Versus Mopping Up After the Crash (2013)
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