The Transmission Channels of Monetary, Macro- and Microprudential Policies and Their Interrelations

Posted: 13 Jun 2017

See all articles by Andreas Beyer

Andreas Beyer

European Central Bank (ECB)

Giulio Nicoletti

European Central Bank

Niki Papadopoulou

Central Bank of Cyprus

Patrick Papsdorf

European Central Bank (ECB)

Gerhard Rünstler

European Central Bank

Claudia Schwarz

European Central Bank (ECB)

João Sousa

European Central Bank (ECB)

Olivier Vergote

European Central Bank (ECB)

Date Written: May 16, 2017

Abstract

This paper investigates the interrelations between monetary, macro- and microprudential policies. It first provides an overview of the three policies, starting with their main instruments and objectives. Monetary policy aims at maintaining price stability and promoting balanced economic growth, macroprudential policies aim at safeguarding the stability of the overall financial system, while microprudential policies contribute to the safety and soundness of individual entities. Subsequently, the paper provides a simplified description of their respective transmission mechanisms and analyses the interactions between them. A conceptual framework is first presented on the basis of which the analysis of the interactions across the different policies can be demonstrated in a stylised manner. These stylised descriptions are then further complemented by model-based simulations illustrating the significant complementarities and interactions between them. Finally, the paper concludes that from a conceptual point of view there are numerous areas of interaction between the policies. These create scope for synergies, which can be reaped by sharing information and expertise across the various policy areas.

Keywords: Central bank policies, non-standard measures, banking, financial regulation, DSGE models

JEL Classification: E58, G28

Suggested Citation

Beyer, Andreas and Nicoletti, Giulio and Papadopoulou, Niki and Papsdorf, Patrick and Rünstler, Gerhard and Schwarz, Claudia and Soucasaux Meneses e Sousa, João Miguel and Vergote, Olivier, The Transmission Channels of Monetary, Macro- and Microprudential Policies and Their Interrelations (May 16, 2017). ECB Occasional Paper No. 191, Available at SSRN: https://ssrn.com/abstract=2985455

Andreas Beyer (Contact Author)

European Central Bank (ECB) ( email )

Eurotower
Kaiserstrasse 29
D-60311 Frankfurt am Main
Germany
+49 69 1344 6468 (Phone)
+44 69 1344 6000 (Fax)

Giulio Nicoletti

European Central Bank ( email )

Kaiserstrasse 29
Frankfurt am Main, Hessen 60311
Germany

Niki Papadopoulou

Central Bank of Cyprus ( email )

80 Kennedy Ave
1076 Nicosia
Cyprus

Patrick Papsdorf

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Gerhard Rünstler

European Central Bank ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Claudia Schwarz

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

João Miguel Soucasaux Meneses e Sousa

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Olivier Vergote

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

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