Macroprudential and Monetary Policies: Implications for Financial Stability and Welfare
- Localización: XXI Encuentro Economía Pública, 2014, pág. 45
- Idioma: inglés
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Resumen
In this paper, we analyze the implications of macroprudential and monetary policies for business cycles, welfare, and .nancial stability. We consider a dynamic stochastic general equilibrium (DSGE) model with housing and collateral constraints. A macroprudential rule on the loan-to-value ratio (LTV), which responds to output and house price deviations, interacts with a traditional Taylor rule for monetary policy. From a positive perspective, introducing a macroprudential tool mitigates the e¤ects of booms in the economy by restricting credit. However, monetary and macroprudential policies may enter in con.ict when shocks come from the supply-side of the economy. From a normative point of view, results show that the introduction of this macroprudential measure is welfare improving. Then, we calculate the combination of policy parameters that maximizes welfare and .nd that the optimal LTV rule should respond relatively more aggressively to house prices than to output deviations.
Finally, we study the e¢ciency of the policy mix. We propose a tool that includes not only the variability of output and in.ation but also the variability of borrowing, to capture the e¤ects of policies on .nancial stability: a three-dimensional policy frontier (3DPF). We .nd that both policies acting together unambiguously improves the stability of the system.
