 Macroprudential and monetary policies: Implications for financial stability and welfareMargarita Rubio and José Carrasco-Gallego Journal of Banking & Finance, 2014, vol. 49, issue C, 326-336 Abstract: In this paper, we analyze the implications of macroprudential and monetary policies for business cycles, welfare, and financial stability. We consider a dynamic stochastic general equilibrium (DSGE) model with housing and collateral constraints. A macroprudential rule for the loan-to-value ratio (LTV), which responds to credit growth, interacts with a traditional Taylor rule for monetary policy. We compute the optimal parameters of these rules both when monetary and macroprudential policies act in a coordinated and in a non-coordinated way. We find that both policies acting together unambiguously improves the stability of the system. In both cases, this interaction is welfare improving for the society, especially in the case of the non-coordinated game. There is though a trade-off between borrowers and savers. However, borrowers can compensate the saver’s welfare loss àla Kaldor–Hicks to achieve a Pareto-superior outcome. Keywords: Macroprudential; Monetary policy; Welfare; Financial stability; Loan-to-value; Kaldor–Hicks efficiency (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:49:y:2014:i:c:p:326-336 DOI: 10.1016/j.jbankfin.2014.02.012 Access Statistics for this article Journal of Banking & Finance is currently edited by Ike Mathur More articles in Journal of Banking & Finance from Elsevier |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.