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Capital Flows, Financial Intermediation and Macroprudential Policies

Matteo Ghilardi () and Shanaka J. Peiris ()
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Shanaka J. Peiris: International Monetary Fund

Open Economies Review, 2016, vol. 27, issue 4, 721-746

Abstract: Abstract This paper develops an open-economy DSGE model with an optimizing banking sector to assess the role of capital flows, macro-financial linkages, and macroprudential policies. The key result is that macroprudential measures can usefully complement monetary policy. Countercyclical macroprudential polices can help reduce macroeconomic volatility and enhance welfare. The results also demonstrate the importance of capital flows and financial stability for business cycle fluctuations as well as the role of supply side financial accelerator effects in the amplification and propagation of shocks.

Keywords: Financial frictions; Capital regulation; Monetary policy (search for similar items in EconPapers)
JEL-codes: E52 E61 F42 (search for similar items in EconPapers)
Date: 2016
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