[PDF] Monetary And Macroprudential Policy In An Estimated Dsge Model Of The Euro Area eBook

Author : Mr.Dominic Quint
Publisher : International Monetary Fund
Page : 61 pages
File Size : 33,77 MB
Release : 2013-10-14
Category : Business & Economics
ISBN : 1484333691

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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 in reducing macroeconomic volatility, improve welfare, and partially substitute for the lack of national monetary policies. Macroprudential policy would always increase the welfare of savers, but their 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.

Author : Giacomo Carboni
Publisher :
Page : 46 pages
File Size : 11,22 MB
Release : 2013
Category :
ISBN :

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The financial crisis highlighted the importance of systemic risks and of policies that can be employed to prevent and mitigate them. Several recent initiatives aim at establishing institutional frameworks for macro-prudential policy. As this process advances further, substantial uncertainties remain regarding the transmission channels of macro-prudential instruments as well as the interactions with other policy functions, and monetary policy in particular. This paper provides an overview and some illustrative model simulations using an estimated DSGE model for the euro area of the macroeconomic interdependence between macro-prudential instruments and monetary policy.

Author : Mr.Jiaqian Chen
Publisher : International Monetary Fund
Page : 58 pages
File Size : 37,26 MB
Release : 2016-03-23
Category : Business & Economics
ISBN : 1475546548

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We analyse the effects of macroprudential and monetary policies and their interactions using an estimated dynamic stochastic general equilibrium (DSGE) model tailored to Sweden. Households face a ceiling on their loan-to-value ratio and must amortize their mortgages. The government grants mortgage interest payment deductions. Lending rates are affected by mortgage risk weights. We find that demand-side macroprudential measures are more effective in curbing household debt ratios than monetary policy, and they are less costly in terms of foregone consumption. A tighter macroprudential stance is also found to be welfare improving, by promoting lower consumption volatility in response to shocks, especially when using a combination of macroprudential instruments.

Author : Mr.Thierry Tressel
Publisher : International Monetary Fund
Page : 32 pages
File Size : 42,34 MB
Release : 2016-01-12
Category : Business & Economics
ISBN : 1513547402

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The crisis has highlighted the importance of setting up macro-prudential oversight frameworks, having effective macro-prudential instruments in place to be called upon to mitigate growing financial imbalances as needed. We develop a new approach using the euro area Bank Lending Survey to assess the effectiveness of macro-prudential policies in containing credit growth and house price appreciation in mortgage markets. We find instruments targeting the cost of bank capital most effective in slowing down mortgage credit growth, and that the impact is transmitted mainly through price margins, the same banking channel as monetary policy. Limits on loan-to-value ratios are also effective, especially when monetary policy is excessively loose.

Author :
Publisher :
Page : 55 pages
File Size : 32,43 MB
Release : 2008
Category :
ISBN :

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This paper develops a DSGE model for an open economy and estimates it on euro area data using Bayesian estimation techniques. The model features nominal and real frictions, as well as financial frictions in the form of liquidity constrained households. The model incorporates active monetary and fiscal policy rules (for government consumption, investment, transfers and wage taxes) and can be used to analyse the effectiveness of stabilisation policies. To capture the unit root character of macroeconomic time-series we allow for stochastic trend in TFP, but instead of filtering data prior to estimation, we estimate the model in growth rates and stationary nominal ratios.

Author : Črt Lenarčič
Publisher :
Page : pages
File Size : 43,83 MB
Release : 2019
Category :
ISBN : 9789616960304

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Recent financial crisis has shown that the prior belief that the active monetary policy in pursuing price stability may not be sufficient enough to maintain financial stability as well as macroeconomic stability in an economy.

Author : Stéphane Adjemian
Publisher :
Page : 65 pages
File Size : 20,23 MB
Release : 2007
Category : Monetary policy
ISBN :

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The objective of this paper is to examine the main features of optimal monetary policy within a micro-founded macroeconometric framework. First, using Bayesian techniques, we estimate a medium scale closed economy DSGE for the euro area. Then, we study the properties of the Ramsey allocation through impulse response, variance decomposition and counterfactual analysis. In particular, we show that, controlling for the zero lower boundconstraint, does not seem to limit the stabilization properties of optimal monetary policy. We also present simple monetary policy rules which can "aproximate" and implement the Ramsey allocation reasonably well. Such optimal simple operational rules seem to reactspecifically to nominal wage inflation. Overall, the Ramsey policy together with its simple rule approximations seem to deliver consistent policy messages and may constitute someuseful normative benchmarks within medium to large scale estimated DSGE framework. However, this normative analysis based on estimated models reinforces the need to improve the economic micro-foundation and the econometric identification of the structural disturbances.