Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/206997
Authors: 
Agur, Itai
Demertzis, Maria
Year of Publication: 
2018
Series/Report no.: 
Bruegel Working Paper 2018/01
Abstract: 
How does monetary policy impact upon macroprudential regulation? This paper models monetary policy's transmission to bank risk taking, and its interaction with a regulator's optimization problem. The regulator uses its macroprudential tool, a leverage ratio, to maintain financial stability, while taking account of the impact on credit provision. A change in the monetary policy rate tilts the regulator's entire trade-off. The authors show that the regulator allows interest rate changes to partly "pass through" to bank soundness by not neutralizing the risk-taking channel of monetary policy. Thus, monetary policy affects financial stability, even in the presence of macroprudential regulation
Subjects: 
Macroprudential
Leverage
Supervision
Transmission
JEL: 
E43
E52
E61
G01
G21
G28
Document Type: 
Working Paper
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