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Effects of Monetary and Macroprudential Policies on Financial Conditions: Evidence from the United States

Aleksandra Zdzienicka, Sally Chen, Federico Diaz Kalan, Stefan Laséen () and Katsiaryna Svirydzenka

No 2015/288, IMF Working Papers from International Monetary Fund

Abstract: The Global Financial Crisis has reopened discussions on the role of the monetary policy in preserving financial stability. Determining whether monetary policy affects financial variables domestically—especially compared to the effects of macroprudential policies— and across borders, is crucial in this context. This paper looks into these issues using U.S. exogenous monetary policy shocks and macroprudential policy measures. Estimates indicate that monetary policy shocks have significant and persistent effects on financial conditions and can attenuate long-term financial instability. In contrast, the impact of macroprudential policy measures is generally more immediate but shorter-lasting. Also, while an exogenous increase in U.S. monetary policy rates tends to reduce credit and house prices in other countries—with the effects varying with country-specific characteristics—an increase driven by improved U.S. economic conditions tends to have the opposite effect. Finally, we do not find evidence of cross-border spillover effects associated with U.S. macroprudential policies.

Keywords: WP; monetary policy shock; monetary policy; financial stability; spillovers; monetary policy policy change; monetary policy tightening; A. monetary policy; rate change; shocks affect; monetary policy action; Macroprudential policy instruments; Macroprudential policy; Credit; Financial sector stability; Bank credit; Global (search for similar items in EconPapers)
Pages: 29
Date: 2015-12-31
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Citations: View citations in EconPapers (24)

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Handle: RePEc:imf:imfwpa:2015/288