Monetary Versus Macroprudential Policies: Causal Impacts of Interest Rates and Credit Controls in the Era of the UK Radcliffe Report

60 Pages Posted: 7 Jul 2016 Last revised: 9 Aug 2024

See all articles by David Aikman

David Aikman

Bank of England - Monetary Assessment and Strategy Division

Oliver Bush

Bank of England; London School of Economics & Political Science (LSE)

Alan M. Taylor

Columbia University; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 3 versions of this paper

Date Written: June 2016

Abstract

We have a world of conjoined monetary and macroprudential policies. But can they function smoothly and with what effects? The evidence is quite limited, especially for advanced economies. We adopt a historical laboratory. From the 1950s to the 1980s, the UK used credit policy tools alongside conventional interest rate policy. These tools are similar to today’s macroprudential policies. We document these tools and craft a new dataset to estimate their effects using modern high-frequency identification with a novel empirical strategy, Factor-Augmented Local Projection. Monetary policy acted mainly on inflation but credit policy acted primarily to modulate bank lending.

Suggested Citation

Aikman, David and Bush, Oliver and Bush, Oliver and Taylor, Alan M., Monetary Versus Macroprudential Policies: Causal Impacts of Interest Rates and Credit Controls in the Era of the UK Radcliffe Report (June 2016). NBER Working Paper No. w22380, Available at SSRN: https://ssrn.com/abstract=2804404

David Aikman (Contact Author)

Bank of England - Monetary Assessment and Strategy Division ( email )

Threadneedle Street
London EC2R 8AH
United Kingdom

Oliver Bush

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

London School of Economics & Political Science (LSE) ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

Alan M. Taylor

Columbia University ( email )

3022 Broadway
New York, NY 10027
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

HOME PAGE: http://nber.org

Centre for Economic Policy Research (CEPR)

London
United Kingdom

HOME PAGE: http://cepr.org

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