scholarly journals Monetary policy or macroprudential policies: What can tame the cycles?

2021 ◽  
Author(s):  
Uwe Vollmer
Keyword(s):  
Monetary Policy ◽  
Macroprudential Policies

scholarly journals Coordination Effects and Optimal Policy Choices of Macroprudential Policy and Monetary Policy

Complexity ◽  
2020 ◽  
Vol 2020 ◽  
pp. 1-11
Author(s):  
Haifeng Pan ◽  
Dingsheng Zhang
Keyword(s):  
Monetary Policy ◽  
Social Welfare ◽  
Optimal Policy ◽  
Real Estate Market ◽  
Macroprudential Policy ◽  
Monetary Policies ◽  
Policy Rules ◽  
Monetary Policy Rules ◽  
Macroprudential Policies ◽  
Dynamic Stochastic

Considering three monetary policy rules, together with two endogenous macroprudential policies that are credit constraints (loan to value, LTV) for households and counter-cyclical capital (capital requirement ratio, CRR) for bankers, this paper establishes a dynamic stochastic general equilibrium (DSGE) model. Based on the welfare analysis of different combinations of macroprudential rules and monetary policy rules, this paper identifies the optimal policy combinations and analyzes the coordination effects between macroprudential policies and monetary policies. The results show that no matter what kind of monetary policy rules is implemented, the introduction of macroprudential rules has improved the level of total social welfare. In the optimal “two pillars” framework of monetary policies and macroprudential rules, the main objective of monetary policy is to stabilize price inflation, and the macroprudential policy to be implemented is the CRR macroprudential policy. This combination can effectively promote the stability of the real estate market, financial market, and macroeconomy, while maximizing the improvement of total social welfare.

The Impact of US Monetary Policy and Other External Shocks on the Hong Kong Economy

2019 ◽  
pp. 239-260
Author(s):  
Hongyi Chen ◽  
Andrew Tsang
Keyword(s):  
Monetary Policy ◽  
Hong Kong ◽  
Financial Stability ◽  
Mainland China ◽  
External Shocks ◽  
Monetary Policies ◽  
Macroprudential Policies ◽  
Loan Quality ◽  
The Impact ◽  
Us Monetary Policy

This chapter uses the factor-augmented vector autoregression framework to study the impact on the Hong Kong economy of the diverging monetary policies by the Fed, the European Central Bank (ECB), and the Bank of Japan (BoJ), as well as the slowdown of the Mainland economy. The empirical results show that shocks in US monetary policy rate mainly affect interest rate-sensitive sectors in Hong Kong and that monetary easing from the ECB and the BoJ somewhat offsets the impact of tightening of the Fed. Real variables such as real GDP growth and the unemployment rate are more sensitive to the economic slowdown in Mainland China. However, Hong Kong’s financial stability, particularly with regard to loan quality, banks’ capital and liquidity, is well maintained by macroprudential policies, suggesting that Hong Kong’s financial system is resilient to external shocks.

Monetary Policy and Macroprudential Policies

2015 ◽  
Vol 48 (2) ◽  
pp. 190-191 ◽  
Author(s):  
P. D. Jonson
Keyword(s):  
Monetary Policy ◽  
Macroprudential Policies

scholarly journals MONETARY MEASURES AND CURRENCY REGULATION DURING MACROECONOMIC INSTABILITY AND WORLD UNCERTAINTY

2021 ◽  
Vol 6 (1) ◽  
pp. 65-71
Author(s):  
Alina Artemenko
Keyword(s):  
Monetary Policy ◽  
Foreign Exchange ◽  
Macroeconomic Fluctuations ◽  
Monetary System ◽  
Macroprudential Policies ◽  
The World ◽  
Macroeconomic Instability ◽  
Before And After ◽  
Global Economic Growth ◽  
And Control

This study is devoted to the comparative analysis of the rules of foreign exchange regulation and control, as well as monetary measures implemented in developed counties during 2003-2020. Accordingly, the purpose is to compare currency restrictions imposed as a response to several economic, political and epidemiological situations and determine their relevance. The study consists of three main parts. The first section highlights the evolution of the monetary policies of different countries during the rapid global economic growth (2003-2007) and key monetary novation before and after the 2008-2009 great recession (macroprudential approach to monetary regulation). The second section describes the world post-crisis monetary system in terms of foreign exchange regimes. Finally, in the third section, the main focus is directed on the period of the COVID-19 crisis and, eventually, key monetary policy measures imposed in the leading economic areas as a reaction to macroeconomic instability and world uncertainty. The practical implications of this study are noteworthy to consider as the problem is outlined in three aspects: 1) evolutionary (with a step-by-step analysis of economic events from 2003 to 2020); 2) instrumental (with analysis of the tools of monetary, macroprudential and monetary policy); 3) country (in the context of world uncertainty). In most cases, the results show that countries produce shocks that transferred to the rest of the world (spillbacks effect). Also, in a financially integrated world, macroprudential policies are valuable and essential because instability becomes a key defect of the modern market system. That is why monetary policy, especially after the crisis, is critical in stabilizing macroeconomic fluctuations.

Effectiveness and channels of macroprudential policies: lessons from the Euro area

2017 ◽  
Vol 25 (3) ◽  
pp. 271-306 ◽  
Author(s):  
Yuanyan Zhang ◽  
Thierry Tressel
Keyword(s):  
Monetary Policy ◽  
Euro Area ◽  
Global Financial Crisis ◽  
Bank Lending ◽  
Panel Var ◽  
Bank Capital ◽  
Credit Growth ◽  
Content Type ◽  
Macroprudential Policies ◽  
The Impact

Purpose The design of a macro-prudential framework and its interaction with monetary policy has been at the forefront of the policy agenda since the global financial crisis. However, most advanced economies (AEs) have little experience using macroprudential policies. As a result, relatively little is known empirically about macroprudential instruments’ effectiveness in mitigating systemic risks in these countries, about their channels of transmission, and about how these instruments would interact with monetary policy. This paper aims to fill in the gap. Design/methodology/approach The authors develop a new approach using the euro area bank lending survey to assess the effectiveness of macro-prudential policies in containing credit growth and house price appreciation in mortgage markets. Estimation is performed under the panel regressions (OLS, GLS) and panel VAR setup. Endogeneity issues arising from measures of macro-prudential policies are addressed by introducing GMM estimation and various instruments. Findings The authors find instruments targeting the cost of bank capital most effective in slowing down mortgage credit growth, and that the impact is transmitted mainly through price margins, the same banking channel as monetary policy. Limits on loan-to-value ratios are also effective, especially when monetary policy is excessively loose. Originality/value With limited data on macroprudential policy measures in the AEs, this paper proposed a new methodology of using answers from bank lending survey as proxies to assess the effectiveness of specific macroprudential measures and their transmission channels.

Macroprudential policy – closing the financial stability gap

2017 ◽  
Vol 25 (4) ◽  
pp. 334-359 ◽  
Author(s):  
Stephan Fahr ◽  
John Fell
Keyword(s):  
Monetary Policy ◽  
Financial Stability ◽  
Relative Effectiveness ◽  
Policy Instruments ◽  
Price Stability ◽  
Macroprudential Policy ◽  
Content Type ◽  
Macroprudential Policies ◽  
Trade Offs ◽  
System Resilience

Purpose The global financial crisis demonstrated that monetary policy alone cannot ensure both price and financial stability. According to the Tinbergen (1952) rule, there was a gap in the policymakers’ toolkit for safeguarding financial stability, as the number of available policy instruments was insufficient relative to the number of policy objectives. That gap is now being closed through the creation of new macroprudential policy instruments. Both monetary policy and macroprudential policy have the capacity to influence both price and financial stability objectives. This paper develops a framework for determining how best to assign instruments to objectives. Design/methodology/approach Using a simplified New-Keynesian model, the authors examine two sets of policy trade-offs, the first concerning the relative effectiveness of monetary and macroprudential policy instruments in achieving price and financial stability objectives and the second concerning trade-offs between macroprudential policy instruments themselves. Findings This model shows that regardless of whether the objective is to enhance financial system resilience or to moderate the financial cycle, macroprudential policies are more effective than monetary policy. Likewise, monetary policy is more effective than macroprudential policy in achieving price stability. According to the Mundell (1962) principle of effective market classification, this implies that macroprudential policy instruments should be paired with financial stability objectives, and monetary policy instruments should be paired with the price stability objective. The authors also find a trade-off between the two sets of macroprudential policy instruments, which indicates that failure to moderate the financial cycle would require greater financial system resilience. Originality/value The main contribution of the paper is to establish – with the help of a model framework – the relative effectiveness of monetary and macroprudential policies in achieving price and financial stability objectives. By so doing, it provides a rationale for macroprudential policy and it shows how macroprudential policy can unburden monetary policy in leaning against the wind of financial imbalances.

scholarly journals Synergies Between Monetary and Macroprudential Policies in Thailand

2020 ◽  
Vol 20 (83) ◽  
Author(s):  
Ichiro Fukunaga ◽  
Manrique Saenz
Keyword(s):  
Monetary Policy ◽  
General Equilibrium ◽  
Dynamic Stochastic General Equilibrium ◽  
Policy Rule ◽  
Macroprudential Policy ◽  
Policy Rules ◽  
Macroprudential Policies ◽  
Wide Range ◽  
Monetary Policy Rule ◽  
Dynamic Stochastic

A dynamic stochastic general equilibrium (DSGE) model tailored to the Thai economy is used to explore the performance of alternative monetary and macroprudential policy rules when faced with shocks that directly impact the financial cycle. In this context, the model shows that a monetary policy focused on its traditional inflation and output objectives accompanied by a well targeted counter-cyclical macroprudential policy yields better macroeconomic outcomes than a lean-against-the-wind monetary policy rule under a wide range of assumptions.

scholarly journals The ECB After the Crisis: Existing Synergies Among Monetary Policy, Macroprudential Policies and Banking Supervision

2019 ◽  
Author(s):  
Nuno Cassola ◽  
Christoffer Kok ◽  
Francesco Paolo Mongelli
Keyword(s):  
Monetary Policy ◽  
Banking Supervision ◽  
Macroprudential Policies

scholarly journals The ECB After the Crisis: Existing Synergies Among Monetary Policy, Macroprudential Policies and Banking Supervision

2019 ◽  
Author(s):  
Nuno Cassola ◽  
Christoffer Kok ◽  
Francesco Paolo Mongelli
Keyword(s):  
Monetary Policy ◽  
Banking Supervision ◽  
Macroprudential Policies

scholarly journals Monetary Policy, Macroprudential Policy, and Financial Stability

2019 ◽  
Vol 11 (1) ◽  
pp. 809-832 ◽  
Author(s):  
David Martinez-Miera ◽  
Rafael Repullo
Keyword(s):  
Monetary Policy ◽  
Equilibrium Model ◽  
Financial Stability ◽  
Theoretical Perspective ◽  
Capital Requirements ◽  
Equity Capital ◽  
Open Market ◽  
Macroprudential Policy ◽  
Macroprudential Policies

This review reexamines from a theoretical perspective the role of monetary and macroprudential policies in addressing the build-up of risks in the financial system. We construct a stylized general equilibrium model in which the key friction comes from a moral hazard problem in firms’ financing that banks’ equity capital serves to ameliorate. Tight monetary policy is introduced by open market sales of government debt, and tight macroprudential policy by an increase in capital requirements. We show that both policies are useful, but macroprudential policy is more effective in fostering financial stability and leads to higher social welfare.

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