Macroprudential rules and monetary policy when financial frictions matter

Arbeitspapier

This paper examines the interaction between monetary policy and macroprudential policy and whether policy makers should respond to financial imbalances. To address this issue, we build a dynamic general equilibrium model that features financial market frictions and financial shocks as well as standard macroeconomic shocks. We estimate the model using Canadian data. Based on these estimates, we show that it is beneficial to react to financial imbalances. The size of these benefits depends on the nature of the shock where the benefits are larger in the presence of financial shocks that have broader effects on the macroeconomy.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Bank of Canada Working Paper ; No. 2012-6

Classification and Topics

• Classification: Wirtschaft ; Monetary Systems; Standards; Regimes; Government and the Monetary System; Payment Systems ; Monetary Policy, Central Banking, and the Supply of Money and Credit: General ; Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook: General
• Subject: Monetary policy framework ; Financial stability ; Financial markets ; Economic models

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Bailliu, Jeannine ; Meh, Césaire ; Zhang, Yahong
• Event: Veröffentlichung
• (who): Bank of Canada
• (where): Ottawa
• (when): 2012

Further information

• DOI: doi:10.34989/swp-2012-6
• Handle: http://hdl.handle.net/10419/80746
• Last update: 10.03.2025, 11:44 AM CET