Macroprudential Policy in a DSGE Model: anchoring the countercyclical capital buffer
Leonardo Ferreira () and
Marcio Nakane ()
No 2015_45, Working Papers, Department of Economics from University of São Paulo (FEA-USP)
The 2007-8 world financial crisis highlighted the deficiency of the regulatory framework in place at the time. Thenceforth many papers have been assessing the introduction of macroprudential policy in a DSGE model. However, they do not focus on the choice of the variable to which the macroprudential instrument must respond - the anchor variable. In order to fulfil this gap, we input different macroprudential rules into the DSGE with a banking sector proposed by Gerali et al. (2010), and estimate its key parameters using Bayesian techniques applied to Brazilian data. We then rank the results using the unconditional expectation of lifetime utility as of time zero as the measure of welfare: the larger the welfare, the better the anchor variable. We find that credit growth is the variable that performs best.
Keywords: Macroprudential Policy; Basel III; Capital Buffer; Anchor Variable (search for similar items in EconPapers)
JEL-codes: E3 E5 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban, nep-cba, nep-dge and nep-mac
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Journal Article: Macroprudential policy in a DSGE model: anchoring the countercyclical capital buffer (2018)
Working Paper: Macroprudential Policy in a DSGE Model: anchoring the countercyclical capital buffer (2015)
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