Marrying Monetary Policy with Macroprudential Regulation: Exploration of Issues

Don Nakornthab Phurichai and Phurichai Rungcharoenkitkul

in Occasional Papers from South East Asian Central Banks (SEACEN) Research and Training Centre

Abstract: Since the eruption of the global financial crisis in 2008, macroprudential regulation has become a mantra in the regulatory world. The soon-to-be-widespread adoption of macroprudential tools will inevitably affect the dynamics of the economy and consequently have a direct bearing on the conduct of monetary policy. This paper explores theoretically several issues surrounding the interplay between macroprudential regulation and monetary policy. Among the key issues examined are the economic stabilization role of rule-based macroprudential policy, the implications of a countercyclical capital requirement on the monetary transmission mechanism, and the optimal policy combination.

Date: 2010
ISBN: -
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