EconPapers    
Economics at your fingertips  
 

Macroprudential regulation and the role of monetary policy

William Tayler () and Roy Zilberman

No 63933064, Working Papers from Lancaster University Management School, Economics Department

Abstract: We study the macroprudential roles of bank capital regulation and monetary policy in a borrowing cost channel model with endogenous financial frictions, driven by credit risk, bank losses and bank capital costs. These frictions induce financial accelerator mechanisms and motivate the examination of a macroprudential toolkit. Following credit shocks, countercyclical regulation is more effective than monetary policy in promoting price, financial and macroeconomic stability. For supply shocks, combining macroprudential regulation with a stronger anti-inflationary policy stance is optimal. The findings emphasize the importance of the Basel III accords in alleviating the output-inflation trade-off faced by central banks, and cast doubt on the desirability of conventional (and unconventional) Taylor rules during periods of financial distress.

Date: 2014
New Economics Papers: this item is included in nep-ban, nep-cba, nep-dge, nep-mac, nep-mon and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed

Downloads: (external link)
http://www.lancaster.ac.uk/media/lancaster-univers ... entialRegulation.pdf (application/pdf)

Related works:
Working Paper: Macroprudential Regulation and the Role of Monetary Policy (2014) Downloads
Working Paper: Macroprudential Regulation and the Role of Monetary Policy (2014) Downloads
Working Paper: Macroprudential Regulation and the Role of Monetary Policy (2014) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:lan:wpaper:63933064

Access Statistics for this paper

More papers in Working Papers from Lancaster University Management School, Economics Department Contact information at EDIRC.
Bibliographic data for series maintained by Giorgio Motta ().

 
Page updated 2023-06-05
Handle: RePEc:lan:wpaper:63933064