Monetary versus macroprudential policies causal impacts of interest rates and credit controls in the era of the UK Radcliffe Report

David Aikman (), Oliver Bush and Alan Davis ()
Additional contact information
Alan Davis: University of California
Authors registered in the RePEc Author Service: Alan M. Taylor

No 610, Bank of England working papers from Bank of England

Abstract: We have entered a world of conjoined monetary and macroprudential policies. But can they function smoothly in tandem, and with what effects? Since this policy cocktail has not been seen for decades, the empirical evidence is almost non-existent. We can only fix this shortcoming in a historical laboratory. The Radcliffe Report (1959), notoriously sceptical about the efficacy of monetary policy, embodied views which led the United Kingdom to a three-decade experiment of using credit controls alongside conventional changes in the central bank interest rate. These non-price tools are similar to policies now being considered or used by macroprudential policymakers. We describe these tools, document how they were used by the authorities, and craft a new, largely hand-collected dataset to help estimate their effects. We develop a novel identification strategy, which we term Factor-Augmented Local Projection (FALP), to investigate the subtly different impacts of both monetary and macroprudential policies. Monetary policy acted on output and inflation broadly in line with consensus views today, but credit controls had markedly different effects and acted primarily to modulate bank lending.

Keywords: Monetary policy; macroprudential policy; credit controls (search for similar items in EconPapers)
JEL-codes: E50 G18 N14 (search for similar items in EconPapers)
Pages: 59 pages
Date: 2016-08-19
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (28)

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Related works:
Working Paper: Monetary versus macroprudential policies:causal impacts of interest rates andcredit controls in the era of the UKradcliffe report (2016)
Working Paper: Monetary Versus Macroprudential Policies: Causal Impacts of Interest Rates and Credit Controls in the Era of the UK Radcliffe Report (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:boe:boeewp:0610

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