A primer on macroprudential policy

Jean-Christophe Poutineau () and Gauthier Vermandel
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Jean-Christophe Poutineau: CREM - Centre de recherche en économie et management - UNICAEN - Université de Caen Normandie - NU - Normandie Université - UR - Université de Rennes - CNRS - Centre National de la Recherche Scientifique

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Abstract: This article introduces macroprudential policy using a static New Keynesian Macroeconomics model with financial frictions. Researchers analyze two related questions: First, they show how the procyclicality 5 of financial factors, captured by the financial accelerator, amplifies the transmission of supply and demand shocks and impacts the intuition they get from a basic intermediate macroeconomics. Second, adopting an optimal policy perspective, they show how a policymaker may use macroprudential policy to complete monetary policy measures. Following the Mundellian Policy Assignment principle, macroprudential policy should be specialized to address the procyclicality problem to 10 suppress welfare losses associated with the building of financial imbalances, thus helping monetary policy to concentrate on the output inflation tradeoff.

Keywords: financial frictions; macroeconomics; macroprudential policy; monetary policy; New Keynesian; optimal interest rate rules (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (4)

Published in Journal of Economic Education, 2015, 46 (1), pp.1-15. ⟨10.1080/00220485.2014.980527⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-01092211

DOI: 10.1080/00220485.2014.980527

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