Monetary and macroprudential policy with multiperiod loans

Michal Brzoza-Brzezina, Paolo Gelain and Marcin Kolasa

No 192, NBP Working Papers from Narodowy Bank Polski

Abstract: We study the implications of multi-period loans for monetary and macroprudential policy, considering several realistic modifications – variable vs. fixed loan rates, non-negativity constraint on newly granted loans, and possibility for the collateral constraint to become slack – to an otherwise standard DSGE model with housing and financial intermediaries. Our general finding is that multiperiodicity affects the working of both policies, though in substantially different ways. We show that multi-period contracts make the monetary policy less effective, but only under fixed rate mortgages, and do not generate significant asymmetry to its transmission. In contrast, the effects of macroprudential policy do not depend much on the type of interest payments, but exhibit strong asymmetries, with tightening having stronger effects than easening, especially for short and medium maturities.

Keywords: multi-period contracts; general equilibrium models; monetary policy; macroprudential policy (search for similar items in EconPapers)
JEL-codes: E44 E51 E52 (search for similar items in EconPapers)
Date: 2014
References: Add references at CitEc
Citations: View citations in EconPapers (15)

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Related works:
Working Paper: Monetary and macroprudential policy with multi-period loans (2014)
Working Paper: Monetary and macroprudential policy with multi-period loans (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:nbp:nbpmis:192

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