Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/219020
Authors: 
Reis, Ricardo
Year of Publication: 
2020
Series/Report no.: 
Bundesbank Discussion Paper 31/2020
Abstract: 
Monetary policy leaves a fiscal footprint. In some circumstances, relieving the fiscal burden becomes the main goal of policy, and inflation control is subordinate. This article notes that the same is true of macroprudential policy, and it characterizes the size and sign of its fiscal footprint, as well as the states of the world in which the temptation for fiscal goals to dominate may be higher. Macroprudential policies that increase the demand for government bonds by banks directly lower the cost of rolling over public debt, but decrease lending, real activity, and tax collections. They lower the incidence and fiscal cost of a financial crisis, but they may make a fiscal crisis more likely.
Subjects: 
financial crisis
sovereign default
diabolic loop
capital and liquidity regulation
JEL: 
E58
E62
G01
G28
H63
ISBN: 
978-3-95729-721-1
Document Type: 
Working Paper

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