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Macroprudential and monetary policies: The need to dance the Tango in harmony

José David Garcia Revelo, Yannick Lucotte () and Florian Pradines-Jobet

Journal of International Money and Finance, 2020, vol. 108, issue C

Abstract: Considering a sample of 37 emerging and advanced economies from 2000Q1 to 2014Q4, we empirically assess how effective macroprudential policies are in curbing domestic credit growth, and whether their effectiveness is affected by monetary policy conditions. We obtain three important results. First our findings suggest in line with previous research that an overall tightening in macroprudential policies is associated with a reduction in credit growth. Second, we show that a restrictive monetary policy enhances the impact of macroprudential tightening on credit growth. Third, our results seem to suggest that monetary policy helps to reduce the transmission delay of macroprudential policy actions. Consequently our results confirm the need for coordination between the two policies.

Keywords: Macroprudential policy; Monetary policy; Financial stability; Excessive credit growth; Policy synchronisation (search for similar items in EconPapers)
JEL-codes: E43 E58 G18 G28 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1016/j.jimonfin.2020.102156

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