Arbeitspapier
The interdependence of monetary and macroprudential policy under the zero lower bound
This paper considers the interdependence of monetary and macroprudential policy in a New Keynesian business cycle model under the zero lower bound constraint. Entrepreneurs borrow in nominal terms from banks and are subject to idiosyncratic default risk. The realized loan return to the bank varies with aggregate risk, such that bank balance sheets are affected by higher-than-expected firm defaults. Monetary and macroprudential policies are given by an interest rate rule and a capital requirement rule, respectively. We first characterize the model's stability properties under different steady state policies. We then analyze the transmission of a risk shock under the zero lower bound and different macroprudential policies. We finally investigate whether these policies are indeed optimal.
- Language
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Englisch
- Bibliographic citation
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Series: NBB Working Paper ; No. 310
- Classification
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Wirtschaft
Financial Markets and the Macroeconomy
Monetary Policy
Central Banks and Their Policies
Policy Objectives; Policy Designs and Consistency; Policy Coordination
Financial Institutions and Services: Government Policy and Regulation
- Subject
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capital requirement
macroprudential policy
monetary policy
zero lower bound
Geldpolitik
Finanzmarktaufsicht
Kapitalbedarf
Niedrigzinspolitik
- Event
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Geistige Schöpfung
- (who)
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Lewis, Vivien
Villa, Stefania
- Event
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Veröffentlichung
- (who)
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National Bank of Belgium
- (where)
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Brussels
- (when)
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2016
- Handle
- Last update
-
10.03.2025, 11:44 AM CET
Data provider
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Object type
- Arbeitspapier
Associated
- Lewis, Vivien
- Villa, Stefania
- National Bank of Belgium
Time of origin
- 2016
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