Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/80746
Authors: 
Bailliu, Jeannine
Meh, Césaire
Zhang, Yahong
Year of Publication: 
2012
Series/Report no.: 
Bank of Canada Working Paper 2012-6
Abstract: 
This paper examines the interaction between monetary policy and macroprudential policy and whether policy makers should respond to financial imbalances. To address this issue, we build a dynamic general equilibrium model that features financial market frictions and financial shocks as well as standard macroeconomic shocks. We estimate the model using Canadian data. Based on these estimates, we show that it is beneficial to react to financial imbalances. The size of these benefits depends on the nature of the shock where the benefits are larger in the presence of financial shocks that have broader effects on the macroeconomy.
Subjects: 
Monetary policy framework
Financial stability
Financial markets
Economic models
JEL: 
E42
E50
E60
Document Type: 
Working Paper

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