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 M. Taylor
No 11353, CEPR Discussion Papers from C.E.P.R. Discussion Papers
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 skeptical about the efficacy of monetary policy, embodied views which led the UK 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: credit controls; macroprudential policy; Monetary policy (search for similar items in EconPapers)
JEL-codes: E50 G18 N14 (search for similar items in EconPapers)
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Working Paper: Monetary versus macroprudential policies causal impacts of interest rates and credit controls in the era of the UK Radcliffe Report (2016)
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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