Monetary and Macroprudential Policy in an Estimated DSGE Model of the Euro Area
By Dominic Quint, Pau Rabanal. Social Science Research Network, 2013
308 citations recorded by the source corpus.
In this paper, we study the optimal mix of monetary and macroprudential policies in an estimated two-country model of the euro area. The model includes real, nominal, and financial frictions, and hence both monetary and macroprudential policy can play a role. We find that the introduction of a macroprudential rule would help reduce macroeconomic volatility, improve welfare, and partially substitute for the lack of national monetary policies. Macroprudential policy would always increase the welfare of savers, but its effects on borrowers depend on the shock that hits the economy. In particular, macroprudential policy may entail welfare costs for borrowers under technology shocks, by increasing the countercyclical behavior of lending spreads.
Subfields: Economics and Econometrics, Finance
View Paper: https://www.semanticscholar.org/paper/9dbdb050589b2f7a6d022fbf2d6818893ef0effd
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Citations in the corpus
- Macroprudential Rules and Monetary Policy when Financial Frictions Matter (2015, unknown): “Quint and Rabanal (2014) also use a DSGE model estimated on euro area data to study how monetary and macroprudential measures could interact in the euro area.”
- Monetary and Macroprudential Policies in an Estimated Model with Financial Intermediation (2014, methodology): “…two alternative objectives: the credit-to-GDP ratio as a proxy for bank leverage (in deviation from steady state values), as suggested by Angelini et al. (2012) and Quint and Rabanal (2013), and the spread measure following the (micro-founded) loss function derived by Cecchetti and Kohler (2012)36.”