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Optimal Monetary and Macroprudential Policies for Financial Stability in a Commodity-Exporting Economy

Ivan Khotulev and Konstantin Styrin ()

Russian Journal of Money and Finance, 2020, vol. 79, issue 2, 3-42

Abstract: We develop a model of analysing the optimal combination of macroprudential and monetary policies in a small open commodity-exporting economy. Unlike a closed economy, where monetary and macroprudential policies tend to be substitutes, in a small open economy the optimal policy mix depends on the specifics of shocks and economic structure. Monetary and macroprudential policies tend to complement each other when the degree of pass-through of credit spreads into marginal costs and prices are sufficiently high, or when a credit boom is caused by a commodity boom, a fraction of consumers lacks access to financial markets, and the government follows a fiscal policy rule. The two policies are substitutes when the complementarity between domestic and imported production inputs is sufficiently high.

Keywords: monetary policy; macroprudential policy; financial stability; commodity exporter; small open economy (search for similar items in EconPapers)
JEL-codes: E52 E58 G01 G28 (search for similar items in EconPapers)
Date: 2020
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Working Paper: Optimal monetary and macroprudential policies for financial stability in a commodity-exporting economy (2019) Downloads
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DOI: 10.31477/rjmf.202002.03

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