Mitigating the Cost of Stricter Macroprudential Policies
Pervin Dadashova () and
Magnus Jonsson ()
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Pervin Dadashova: National Bank of Ukraine
Magnus Jonsson: Sveriges Riksbank
No 02/2019, Working Papers from National Bank of Ukraine
We examine how to implement macroprudential policies – stricter capital requirements and loan-tovalue limits – in order to mitigate the output loss of corporate debt deleveraging. The analysis is performed in a dynamic general equilibrium model calibrated to fit the U.S. economy. Stricter capital requirements are generally costlier in terms of output losses than stricter loan-to-value limits. For both instruments, the output loss is a convex function of the debt-to-GDP ratio. Finally, the output loss can be significantly reduced by implementing the requirements gradually, and by activating a countercyclical capital buffer.
Keywords: capital requirements; loan-to-value requirements; output loss; gradual implementation (search for similar items in EconPapers)
JEL-codes: C54 E44 G28 G38 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban, nep-cba, nep-dge, nep-mac and nep-ore
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Persistent link: https://EconPapers.repec.org/RePEc:ukb:wpaper:02/2019
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