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Macroprudential Policy Transmission and Interaction with Fiscal and Monetary Policy in an Emerging Economy: a DSGE model for Brazil

Fabia Carvalho () and Marcos Castro

No 453, Working Papers Series from Central Bank of Brazil, Research Department

Abstract: We use a DSGE model with heterogeneous financial frictions and foreign capital flows estimated with Bayesian techniques for Brazil to investigate optimal combinations of simple macroprudential, fiscal and monetary policy rules that can react to the business and/or the financial cycle. We find that the gains from implementing a cyclical fiscal policy are only significant if macroprudential policy countercyclically reacts to the financial cycle. Optimal fiscal policy is countercyclical in the business cycle and slightly procyclical in the financial cycle

Date: 2016-12
New Economics Papers: this item is included in nep-cba, nep-dge, nep-mac, nep-mon and nep-opm
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Journal Article: Macroprudential policy transmission and interaction with fiscal and monetary policy in an emerging economy: a DSGE model for Brazil (2017) Downloads
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