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Macro-Prudential Policy and the Conduct of Monetary Policy

D. Beau, Laurent Clerc () and Benoit Mojon ()

Working papers from Banque de France

Abstract: 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
Date: 2012
New Economics Papers: this item is included in nep-cba, nep-dge, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
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Related works:
Chapter: Macro-Prudential Policy and the Conduct of Monetary Policy (2014) Downloads
Working Paper: Macro-Prudential Policy and the Conduct of Monetary Policy (2013) Downloads
Working Paper: Macro-prudential policy and the conduct of monetary policy (2011) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:bfr:banfra:390

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