Targeting Financial Stability: Macroprudential or Monetary Policy?
David Aikman,
Julia Giese,
Sujit Kapadia and
Michael McLeay
Additional contact information
David Aikman: King's College London
Julia Giese: Bank of England
Michael McLeay: Bank of England
International Journal of Central Banking, 2023, vol. 19, issue 1, 159-242
Abstract:
This paper explores monetary-macroprudential policy interactions in a simple, calibrated New Keynesian model incorporating the possibility of a credit boom precipitating a financial crisis and a loss function reflecting financial stability considerations. Deploying the countercyclical capital buffer (CCyB) improves outcomes significantly relative to when interest rates are the only instrument. The instruments are typically substitutes, with monetary policy loosening when the CCyB tightens. We also examine when the instruments are complements and assess how different shocks, the effective lower bound for monetary policy, market-based finance, and a risktaking channel of monetary policy affect our results.
JEL-codes: E52 E58 G01 G28 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (4)
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Related works:
Working Paper: Targeting financial stability: macroprudential or monetary policy? (2019) 
Working Paper: Targeting financial stability: macroprudential or monetary policy? (2018) 
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Persistent link: https://EconPapers.repec.org/RePEc:ijc:ijcjou:y:2023:q:1:a:4
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