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Policy mandates and institutional architecture

Ioannis Lazopoulos () and Vasco Gabriel

Journal of Banking & Finance, 2019, vol. 100, issue C, 122-134

Abstract: The model developed in this paper examines the interaction between monetary and macroprudential policies in promoting macroeconomic stability, highlighting the role of shocks and policy instruments. The paper shows that assigning the mandates of monetary and financial stability to independent authorities enhances macroeconomic stability only when some level of coordination exists between policymakers and it is the dominant institutional arrangement when monetary stability is socially important. Instead, when society values financial stability, internalising the policy spillovers by assigning the two mandates to a single policymaker could become the dominant configuration depending on the model’s parameter values.

Keywords: Monetary policy; Macroprudential policy; Institutional mandates; Policy coordination (search for similar items in EconPapers)
JEL-codes: E42 E44 E52 E58 E61 (search for similar items in EconPapers)
Date: 2019
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