Arbeitspapier

Benefits of macro-prudential policy in low interest rate environments

I study macro-prudential policy intervention in economies with secularly low interest rates. Intervention boosts risk-free real interest rates unintentionally, simply as a by-product of containing systemic risk in financial markets. Thus, intervention also boosts the natural rate of return in particular (i.e., the equilibrium risk-free rate that is consistent with inflation on target and production at full capacity). These results point to a novel complementarity between financial stability and macroeconomic stabilization. Complementary is sufficiently strong to generate a divine coincidence if the natural rate is secularly low, but not too low.

ISBN
978-92-899-4415-1
Language
Englisch

Bibliographic citation
Series: ECB Working Paper ; No. 2498

Classification
Wirtschaft
Price Level; Inflation; Deflation
Business Fluctuations; Cycles
Financial Markets and the Macroeconomy
Subject
Macro-prudential Policy
Systemic Risk
Natural Rate of Return

Event
Geistige Schöpfung
(who)
Van der Ghote, Alejandro
Event
Veröffentlichung
(who)
European Central Bank (ECB)
(where)
Frankfurt a. M.
(when)
2020

DOI
doi:10.2866/165350
Handle
Last update
10.03.2025, 11:45 AM CET

Data provider

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Object type

  • Arbeitspapier

Associated

  • Van der Ghote, Alejandro
  • European Central Bank (ECB)

Time of origin

  • 2020

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