Interactions and Coordination between Monetary and Macro-prudential Policies

61 Pages Posted: 6 Nov 2017 Last revised: 12 Apr 2019

See all articles by Alejandro Van der Ghote

Alejandro Van der Ghote

European Central Bank (ECB) - Directorate General Research

Multiple version iconThere are 2 versions of this paper

Date Written: February 2019

Abstract

I study real and welfare effects of monetary and macro-prudential policies in a general equilibrium model of financial intermediation with endogenous risk. I obtain that macro-prudential capital requirements reduce the risk and intensity of systemic financial distress as well as facilitate the recovery from financial distress episodes. Coordination with monetary (i.e., interest-rate) policy reinforces these effects, but at the expense of increasing variability in inflation and in the employment gap.

Keywords: Monetary policy, Macro-prudential policy, Policy coordination, Financial frictions, Nominal Rigidities

JEL Classification: E31, E32, E44, E52, E61, G01

Suggested Citation

Van der Ghote, Alejandro, Interactions and Coordination between Monetary and Macro-prudential Policies (February 2019). Available at SSRN: https://ssrn.com/abstract=3065352 or http://dx.doi.org/10.2139/ssrn.3065352

Alejandro Van der Ghote (Contact Author)

European Central Bank (ECB) - Directorate General Research ( email )

Sonnemannstrasse 20
Frankfurt am Main, Hesse D-60314
Germany

HOME PAGE: http://https://sites.google.com/view/avanderghote/home

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