Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/194117
Authors: 
Gersbach, Hans
Hahn, Volker
Liu, Yulin
Year of Publication: 
2018
Series/Report no.: 
Economics Working Paper Series 18/294
Abstract: 
We integrate banks and the coexistence of bank and bond financing into an otherwise standard New Keynesian framework. There are two policy-makers: a central banker, who can decide on short-term nominal interest rates, and a macroprudential policy-maker, who can vary aggregate capital requirements. The two policy instruments can be used to stabilize shocks, to moderate bank credit cycles, and to induce a more efficient allocation of resources across sectors. Moreover, we investigate the optimal combination of simple policy rules for interest rates and capital requirements. The optimal policy rules imply that the central bank should focus exclusively on price stability and the macroprudential policy-maker should react exclusively to changes in loan rate premia.
Subjects: 
central banks
banking regulation
capital requirements
optimal monetary policy
JEL: 
E520
E580
G280
Persistent Identifier of the first edition: 
Document Type: 
Working Paper
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