Monetary and macroprudential policy with multi-period loans

Michal Brzoza-Brzezina, Paolo Gelain and Marcin Kolasa

No 2014/16, Working Paper from Norges Bank

Abstract: We study the implications of multi-period loans for monetary and macroprudential policy, considering several realistic modifications - variable vs. fixed loan rates, non-negativity constraint on newly granted loans, and possibility for the collateral constraint to become slack - to an otherwise standard DSGE model with housing and financial intermediaries. Our general finding is that multiperiodicity affects the working of both policies, though in substantially different ways. We show that multiperiod contracts make the monetary policy less effective, but only under fixed rate mortgages, and do not generate significant asymmetry to its transmission. In contrast, the effects of macroprudential policy do not depend much on the type of interest payments, but exhibit strong asymmetries, with tightening having stronger effects than easening, especially for short and medium maturities.

Keywords: Multi-period contracts; Monetary policy; Macroprudential policy (search for similar items in EconPapers)
JEL-codes: E44 E51 E52 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2014-11-27
New Economics Papers: this item is included in nep-ban, nep-cba, nep-dge, nep-mac and nep-mon
References: Add references at CitEc
Citations: View citations in EconPapers (25)

Downloads: (external link)
http://www.norges-bank.no/en/Published/Papers/Working-Papers/2014/16/

Related works:
Working Paper: Monetary and macroprudential policy with multiperiod loans (2014)
Working Paper: Monetary and macroprudential policy with multi-period loans (2014)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bno:worpap:2014_16

Access Statistics for this paper

More papers in Working Paper from Norges Bank Contact information at EDIRC.
Bibliographic data for series maintained by ().