Arbeitspapier
Quantifying financial stability trade-offs for monetary policy: A quantile VAR approach
We propose a novel empirical approach to inform monetary policymakers about the potential effects of policy action when facing trade-offs between financial and macroeconomic stability. We estimate a quantile vector autoregression (QVAR) for the euro area covering the real economy, monetary policy and measures of ex ante and ex post systemic risk representing financial stability, Policy implications are derived from scenario analyses where the associated costs and benefits are functions of the projected paths of the potentially asymmetric distributions of inflation and economic growth, allowing us to take a risk management perspective, One exercise considers the intertemporal financial stability trade-off in the context of the global financial crisis, where we find ex post evidence in favour of monetary policy leaning against the financial cycle, Another exercise considers the short-term financial stability trade-off when deciding the appropriate speed of monetary policy tightening to combat inflationary pressures in a fragile financial environment.
- ISBN
-
978-92-899-6118-9
- Language
-
Englisch
- Bibliographic citation
-
Series: ECB Working Paper ; No. 2833
- Classification
-
Wirtschaft
Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
Prices, Business Fluctuations, and Cycles: Forecasting and Simulation: Models and Applications
Financial Markets and the Macroeconomy
Monetary Policy
Financial Crises
- Subject
-
Policy trade-offs
systemic risk
growth-at-risk
quantile regression
- Event
-
Geistige Schöpfung
- (who)
-
Chavleishvili, Sulkhan
Kremer, Manfred
Lund-Thomsen, Frederik
- Event
-
Veröffentlichung
- (who)
-
European Central Bank (ECB)
- (where)
-
Frankfurt a. M.
- (when)
-
2023
- DOI
-
doi:10.2866/197182
- Handle
- Last update
-
10.03.2025, 11:43 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Chavleishvili, Sulkhan
- Kremer, Manfred
- Lund-Thomsen, Frederik
- European Central Bank (ECB)
Time of origin
- 2023
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