Taming macroeconomic instability

Francesco Lamperti, Antoine Mandel, Mauro Napoletano, Alessandro Sapio, Andrea Roventini, Tomas Balint () and Igor Khorenzhenko
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Francesco Lamperti: UP1 - Université Paris 1 Panthéon-Sorbonne
Alessandro Sapio: PARTHENOPE - Università degli Studi di Napoli “Parthenope” = University of Naples
Tomas Balint: UP1 - Université Paris 1 Panthéon-Sorbonne
Igor Khorenzhenko: CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, Universität Bielefeld = Bielefeld University

Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) from HAL

Abstract: We develop an agent-based model to study the macroeconomic impact of alternative macro-prudential regulations and their possible interactions with different monetary policy rules. The aim is to shed light on the most appropriate policy mix to achieve the resilience of the banking sector and foster macroeconomic stability. Simulation results show that a triple-mandate Taylor rule,focused onoutput gap, inflationand credit growth, and a BaselIII prudential regulationis the bestpolicymix to improve the stability ofthe banking sector and smooth output fluctuations. Moreover, we consider the different levers of Basel III and their combinations. We find that minimum capital requirements and counter-cyclical capital buffers allow to achieve results close to the Basel III first-best with a much more simplified regulatory framework. Finally, the components of Basel III are non-additive: the inclusion of an additional lever does not always improve the performance of the macro-prudential regulation.

Keywords: Macro-prudential policy; Basel III regulation; Financial stability; Monetary policy; Agent based computational economics (search for similar items in EconPapers)
Date: 2017-02
Note: View the original document on HAL open archive server: https://sciencespo.hal.science/hal-03399574v1
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Citations: View citations in EconPapers (72)

Published in Journal of Economic Behavior and Organization, 2017, 19 (134), pp.117 - 140. ⟨10.1016/j.jebo.2016.12.017⟩

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Related works:
Working Paper: Taming macroeconomic instability (2017)
Working Paper: Taming macroeconomic instability (2017)
Working Paper: Taming macroeconomic instability (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:cesptp:hal-03399574

DOI: 10.1016/j.jebo.2016.12.017

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