Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/208312
Authors: 
Aikman, David
Giese, Julia
Kapadia, Sujit
McLeay, Michael
Year of Publication: 
2019
Series/Report no.: 
ECB Working Paper No. 2278
Abstract: 
This paper explores monetary-macroprudential policy interactions in a simple, calibrated New Keynesian model incorporating the possibility of a credit boom precipitating a financial crisis and a loss function reflecting financial stability considerations. Deploying the countercyclical capital buffer (CCyB) improves outcomes significantly relative to when interest rates are the only instrument. The instruments are typically substitutes, with monetary policy loosening when the CCyB tightens. We also examine when the instruments are complements and assess how different shocks, the effective lower bound for monetary policy, market-based finance and a risk-taking channel of monetary policy affect our results.
Subjects: 
macroprudential policy
monetary policy
financial stability
countercyclical capital buffer
financial crises
credit boom
JEL: 
E52
E58
G01
G28
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-3540-1
Document Type: 
Working Paper

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