Macro-Prudential Policy and the Conduct of Monetary Policy
Laurent Clerc () and
Benoit Mojon ()
Working papers from Banque de France
In this paper, we analyse the interactions between monetary and macro-prudential policies and the circumstances under which such interactions call for their coordinated implementation. We start with a review of the interdependencies between monetary and macro-prudential policies. Then, we use a DSGE model incorporating financial frictions, heterogeneous agents and housing, which is estimated for the euro area over the period 1985 -2010, to identify the circumstances under which monetary and macro-prudential policies may have compounding, neutral or conflicting impacts on price stability. We compare inflation dynamics across four “policy regimes” depending on: (a) the monetary policy objectives – that is, whether the policy instrument, the short-term interest rate factors in financial stability considerations by leaning against credit growth; and (b) the existence, or not, of an authority in charge of a financial stability objective through the implementation of macro-prudential policies that can “lean against credit” without affecting the short-term interest rate.
Keywords: Monetary Policy; Financial Stability; Macro-prudential Policy; ESRB. (search for similar items in EconPapers)
JEL-codes: E51 E58 E37 G13 G18 (search for similar items in EconPapers)
Pages: 34 pages
New Economics Papers: this item is included in nep-cba, nep-dge, nep-mac and nep-mon
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Chapter: Macro-Prudential Policy and the Conduct of Monetary Policy (2014)
Working Paper: Macro-Prudential Policy and the Conduct of Monetary Policy (2013)
Working Paper: Macro-prudential policy and the conduct of monetary policy (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:bfr:banfra:390
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