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.

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.

Optimal Monetary Policy Rules in an Estimated Sticky-Information Model

2009 ◽  
Vol 1 (2) ◽  
pp. 1-28 ◽  
Author(s):  
Ricardo Reis
Keyword(s):  
Monetary Policy ◽  
Optimal Policy ◽  
Price Level ◽  
Dynamic Stochastic General Equilibrium ◽  
Optimal Monetary Policy ◽  
Sticky Information ◽  
Policy Rules ◽  
Monetary Policy Rules ◽  
Interest Rate Rule ◽  
Dynamic Stochastic

This paper uses a dynamic stochastic general equilibrium (DSGE) model with sticky information as a laboratory to study monetary policy. It characterizes the model's predictions for macro dynamics and optimal policy at prior parameters, and then uses data on five US macroeconomic series to update the parameters and provide an estimated model that can be used for policy analysis. The model answers a few policy questions. How does sticky information affect optimal monetary policy? What is the optimal interest rate rule? What is the optimal elastic price-level targeting rule? How does parameter uncertainty affect optimal policy? Are the conclusions for the Euro area different? (JEL E13, E31, E43, E52)

scholarly journals MONETARY POLICY RULES IN MALAYSIA, SINGAPORE AND THAILAND

2020 ◽  
Vol 23 (4) ◽  
pp. 565-596
Author(s):  
Chai-Thing Tan ◽  
Azali Mohamed
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Government Spending ◽  
Taylor Rule ◽  
Central Banks ◽  
Monetary Policies ◽  
Policy Rules ◽  
Monetary Policy Rules ◽  
The Exchange Rate ◽  
Monetary Policy Reaction Function

This paper investigates whether monetary policies in Malaysia, Thailand and Singapore are best represented by either the Taylor rule or the augmented Taylor rule. It finds that the augmented Taylor rule, which incorporates the exchange rate and government spending, best represents monetary policies in these countries. The results show that past inflation and the output gap play a role in the monetary policy reaction function in Malaysia and Thailand. The results further show a strong preference towards interest rate smoothing, government spending, and the exchange rate by the central banks.

scholarly journals Real Estate, Economic Stability and the New Macro-Financial Policies

2020 ◽  
Vol 13 (1) ◽  
pp. 236
Author(s):  
José A. Carrasco-Gallego
Keyword(s):  
Real Estate ◽  
Financial Sector ◽  
Real Estate Market ◽  
Macroprudential Policy ◽  
Financial Policies ◽  
Macroprudential Policies ◽  
Price Shock ◽  
Dynamic Stochastic ◽  
Technology Shock ◽  
Financial Shock

The influence of real estate on finance and the whole economy has captured significant attention, especially since the aftermath of the Great Recession, because of the potential of this sector to destabilize markets. This paper explores the other way around: housing markets’ capacity to stabilize the economy through different macroprudential policies facing several types of shocks to achieve financial stability as a driver of sustainability. Specifically, a dynamic stochastic general equilibrium model is used to evaluate the effectiveness to stabilize the economy of different macroprudential tools based on the loan-to-value ratio for real estate, on the countercyclical capital buffer for the financial sector and a combination of both tools, facing a housing price shock, a technology shock and a financial shock. The model presents three types of agents (borrowers, entrepreneurs and banks) in an economy with a real estate market, a financial sector, a labor market and a production sector. The government can use different macroprudential policies to stabilize the economy, leaning against the wind of several shocks to achieve economic and financial sustainability. The assessment of the effectiveness of each policy shows that, in the case of a housing sector shock and a technology shock, the more effective policy is the one based on a countercyclical rule on the loan-to-value ratio for the real estate sector as a macroprudential tool. Furthermore, with a house price shock, if the macroprudential authority applies a macroprudential policy based on the countercyclical capital buffer, the shock may be exacerbated. Additionally, when there is a financial shock, the macroprudential authority may face a trade-off between several macro-financial policies depending on its objective. Therefore, it is not recommendable to automatically apply a macroprudential policy without a meticulous analysis of the nature of the shock that the economy is experimenting with and how different policies can stabilize or destabilize the different markets and, therefore, reach higher or lower sustainability.

scholarly journals The Design and Conduct of Monetary Policy: Lessons for Pakistan (The Quaid-i-Azam Lecture)

2009 ◽  
Vol 48 (4I) ◽  
pp. 337-356 ◽  
Author(s):  
Mohsin S. Khan
Keyword(s):  
Monetary Policy ◽  
Inflation Targeting ◽  
Jel Classification ◽  
Monetary Policies ◽  
Policy Rules ◽  
Monetary Policy Rules ◽  
Global Capital ◽  
Mobile Capital ◽  
Recent Developments ◽  
Rules Versus Discretion

Movements in global capital during the late 1990s and the greater emphasis on price stability led many countries to abandon fixed exchange rate regimes and to design institutions and monetary policies to achieve credibility in the goal of lowering inflation. Such recent developments have brought to the forefront the idea that freely mobile capital, independent monetary policy, and fixed exchange rates form an “impossible trinity”. Inflation-targeting regimes being adopted by many countries provide a way of resolving this dilemma, and it is suggested that such a regime be implemented in Pakistan as well. JEL classification: E42, E52 Keywords: Monetary Policy, Rules versus Discretion, Inflation Targeting

scholarly journals Evaluating the welfare aspects of the simple monetary ruls for Iran

2015 ◽  
Vol 60 (206) ◽  
pp. 141-166
Author(s):  
Mohsen Khyareh ◽  
Vahid Omran ◽  
Mohammad Ehsani
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Welfare Loss ◽  
Dsge Models ◽  
Impulse Response Functions ◽  
Policy Rule ◽  
Policy Rules ◽  
Monetary Policy Rules ◽  
Dynamic Stochastic ◽  
Monetary Rules

This paper following a monetary growth rate rule aims to compare the properties of different monetary policy rules in Iran. In that regards, the paper draws on the New Keynesian Dynamic Stochastic General Equilibrium (DSGE) models. Within this framework, we rank the different policy rules based on the Impulse response Functions, the volatility of key macroeconomic variables and the welfare loss function. The paper concludes that the effects of alternative monetary rules depend on what shocks affect the economy, the exchange rate regime, and the choice of inflation index. When the economy experiences productivity shocks, domestic iflation targeting is welfare-superior to other monetary rules. However, in the case of other shocks except productivity shock a managed exchange rate is the best policy rule. Finally, the results of welfare loss of alternative monetary policy rules allowed noticing the nature of the shocks affecting the economy dictate the implication and choice of the best monetary policy rule.

Sign in / Sign up

Export Citation Format

Share Document