Interactions of Monetary and Macroprudential Policies in a Model of the Korean Economy

Elena Afanasyeva and Meral Karasulu

VfS Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order from Verein für Socialpolitik / German Economic Association

Abstract: We use a microfounded dynamic stochastic general equilibrium (DSGE) model with banks to study interactions between monetary and macroprudential policies in a small open economy. The model is calibrated/estimated for Korea. Cooperation of monetary and macroprudential policies is optimal under a financial shock. Prolonged periods of monetary accommodation lead to inflationary pressures, lower the effectiveness of macroprudential instrument (loan-to-value ratio) and contribute to further credit growth, increasing vulnerabilities.

JEL-codes: E58 E61 G28 (search for similar items in EconPapers)
Date: 2013
New Economics Papers: this item is included in nep-cba, nep-dge and nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc13:79884

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