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Macroprudential policy and imbalances in the euro area

Michal Brzoza-Brzezina, Marcin Kolasa () and Krzysztof Makarski ()

No 138, NBP Working Papers from Narodowy Bank Polski, Economic Research Department

Abstract: Since its creation the euro area suffered from imbalances between its core and peripheral members. This paper checks whether macroprudential policy applied to the peripheral countries could contribute to providing more macroeconomic stability in this region. To this end we build a twoeconomy macrofinancial DSGE model and simulate the effects of macroprudential policies under the assumption of asymmetric shocks hitting the core and the periphery. We find that macroprudential policy is able to partly make up for the loss of independent monetary policy in the periphery. Moreover, LTV policy seems more efficient than regulating capital adequacy ratios. However, for the policies to be effective, they must be set individually for each region. Area-wide policy is almost ineffective in this respect.

Keywords: euro-area imbalances; macroprudential policy; DSGE with banking sector (search for similar items in EconPapers)
JEL-codes: E32 E44 E58 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban, nep-cba, nep-dge, nep-mac, nep-mon and nep-opm
Date: 2013
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Citations: View citations in EconPapers (12) Track citations by RSS feed

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http://www.nbp.pl/publikacje/materialy_i_studia/138_en.pdf (application/pdf)

Related works:
Journal Article: Macroprudential policy and imbalances in the euro area (2015) Downloads
Working Paper: Macroprudential policy instruments and economic imbalances in the euro area (2013) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:nbp:nbpmis:138

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