Financial Intermediation and the Effectiveness of Macroprudential Policies

26 Pages Posted: 16 Sep 2020

See all articles by Hao Jin

Hao Jin

Wang Yanan Institute for Studies in Economics (WISE) and School of Economics, Xiamen University

Chen Xiong

Xiamen University - Wang Yanan Institute for Studies in Economics (WISE)

Date Written: January 23, 2020

Abstract

We analyze the effects of macroprudential policies in a business cycle framework with imperfect financial intermediation a la Gertler and Kiyotaki (2010). We show that macroprudential policies that act as proportional taxes on banks' deposits (or assets) are ineffective if the tax proceeds are rebated to the banks so that the policies are revenue-neutral. On the other hand, revenue-non neutral macroprudential policies transmit through a net worth channel and are effective in containing credit growth. We also show that "leaning-against-the-wind" macroprudential policies are able to stabilize economic fluctuations and improve welfare when they are revenue-non-neutral.

Keywords: Financial Intermediaries; Financial Frictions; Credit Cycles; Macroprudential Policy

JEL Classification: E32, E44, E61

Suggested Citation

Jin, Hao and Xiong, Chen, Financial Intermediation and the Effectiveness of Macroprudential Policies (January 23, 2020). Available at SSRN: https://ssrn.com/abstract=3648900 or http://dx.doi.org/10.2139/ssrn.3648900

Hao Jin (Contact Author)

Wang Yanan Institute for Studies in Economics (WISE) and School of Economics, Xiamen University ( email )

Economics Building D215
Xiamen University
Xiamen, Fujian 361005
China
86-592-2180353 (Phone)
86-592-2187708 (Fax)

HOME PAGE: http://haojin.weebly.com/

Chen Xiong

Xiamen University - Wang Yanan Institute for Studies in Economics (WISE) ( email )

A 307, Economics Building
Xiamen, Fujian 10246
China

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
28
Abstract Views
177
PlumX Metrics