On the Limits of Macroprudential Policy

Marcin Kolasa

No 207, 2015 Meeting Papers from Society for Economic Dynamics

Abstract: This paper considers a canonical New Keynesian macrofinancial model to analyze how macroprudential policy tools can help the monetary authority in reaching a selection of dual stabilization objectives. We show that using the loan-to-value ratio as an additional policy instrument does not allow to resolve the standard inflation-output volatility tradeoff. Simultaneous stabilization of inflation and either credit or house prices with monetary and macroprudential policy is possible only if the role of credit in the economy is very small. Overall, our results suggest that macroprudential policy has important limits as a complement to monetary policy.

Date: 2015
New Economics Papers: this item is included in nep-cba, nep-dge, nep-mac and nep-mon
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Related works:
Journal Article: On the Limits of Macroprudential Policy (2021)
Working Paper: On the limits of macroprudential policy (2016)
Working Paper: On the limits of macroprudential policy (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed015:207

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