Monetary and Macroprudential Policy in an Estimated DSGE Model of the Euro Area

WP/13/209

In this paper, we study the optimal mix of monetary and macroprudential policies in an estimated two-country model of the euro area. The model includes real, nominal and financial frictions, and hence both monetary and macroprudential policy can play a role. Wefind that the introduction of a macroprudential rule would help in reducing macroeconomic volatility, improve welfare, and partially substitute for the lack of national monetary policies. Macroprudential policy would always increase the welfare of savers, but their effects on borrowers depend on the shock that hits the economy. In particular, macroprudential policy may entail welfare costs for borrowers under technology shocks, by increasing the countercyclical behavior of lending spreads.
Publication date: October 2013
ISBN: 9781484333693
$18.00
Add to Cart by clicking price of the language and format you'd like to purchase
Available Languages and Formats
Paperback
PDF
English
Prices in red indicate formats that are not yet available but are forthcoming.
Topics covered in this book

This title contains information about the following subjects. Click on a subject if you would like to see other titles with the same subjects.

Monetary Policy , EMU , Basel III , Financial Frictions

Summary