Monetary and macroprudential policy in an estimated DSGE model of the Euro Area

Dominic Quint and Pau Rabanal

No 2014/5, Discussion Papers from Free University Berlin, School of Business & Economics

Abstract: In this paper, we study the optimal mix of monetary and macroprudential policies in an estimated two-country model of the euro area. The model includes real, nominal and ?nancial frictions, and hence both monetary and macroprudential policy can play a role. We ?nd that the introduction of a macroprudential rule would help in reducing macroeconomic volatility, improve welfare, and partially substitute for the lack of national monetary policies. Macroprudential policy would always increase the welfare of savers, but their e¤ects on borrowers depend on the shock that hits the economy. In particular, macroprudential policy may entail welfare costs for borrowers under technology shocks, by increasing the countercyclical behavior of lending spreads.

Keywords: Monetary Policy; EMU; Basel III; Financial Frictions (search for similar items in EconPapers)
JEL-codes: C51 E44 E52 (search for similar items in EconPapers)
Date: 2014
New Economics Papers: this item is included in nep-ban, nep-cba, nep-dge, nep-eec, nep-mac, nep-mon and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (236)

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/94218/1/discpaper2014_5.pdf (application/pdf)

Related works:
Journal Article: Monetary and Macroprudential Policy in an Estimated DSGE Model of the Euro Area (2014)
Working Paper: Monetary and Macroprudential Policy in an Estimated DSGE Model of the Euro Area (2013)
Working Paper: Monetary and Macroprudential Policy in an Estimated DSGE Model of the Euro Area (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:fubsbe:20145

Access Statistics for this paper

More papers in Discussion Papers from Free University Berlin, School of Business & Economics Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().