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The interaction between macroprudential policy and monetary policy: overview

Matthieu Bussiere (), Jin Cao (), Jakob de Haan (), Robert Hills (), Simon Lloyd, Baptiste Meunier, Justine Pedrono (), Dennis Reinhardt (), Sonalika Shina (), Rhiannon Sowerbutts and Konstantin Styrin ()
Additional contact information
Robert Hills: Bank of England, Postal: Bank of England, Threadneedle Street, London, EC2R 8AH
Justine Pedrono: Banque de France
Sonalika Shina: Reserve Bank of India
Konstantin Styrin: Bank of Russia

Authors registered in the RePEc Author Service: Sonalika Sinha ()

No 886, Bank of England working papers from Bank of England

Abstract: This paper presents the main findings of an International Banking Research Network initiative examining the interaction between monetary policy and macroprudential policy in determining international bank lending. We give an overview on the data, empirical specifications and results of the seven papers from the initiative. The papers are from a range of core and smaller advanced economies, and emerging markets. The main findings are as follows. First, there is evidence that macroprudential policy in recipient countries can partly offset the spillover effects of monetary policy conducted in core countries. Meanwhile, domestic macroprudential policy in core countries can also affect the cross‑border transmission of domestic monetary policy via lending abroad, by limiting the increase in lending by less strongly capitalised banks. Second, the findings highlight that studying heterogeneities across banks provides complementary insights to studies using more aggregate data and focusing on average effects. In particular, we find that individual bank characteristics such as bank size or G‑SIB status play a first‑order role in the transmission of these policies. Finally, the impacts differ considerably across prudential policy instruments, which also suggests the importance of more granular analysis.

Keywords: Cross-border bank lending; financial intermediation; monetary policy; macroprudential policy; policy interactions; spillovers (search for similar items in EconPapers)
JEL-codes: E52 F21 F30 F42 G21 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2020-10-09
New Economics Papers: this item is included in nep-ban, nep-cba, nep-mac and nep-opm
References: View references in EconPapers View complete reference list from CitEc
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Persistent link: https://EconPapers.repec.org/RePEc:boe:boeewp:0886

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