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The Interaction of Monetary and Macroprudential Policies in the Pursuit of the Central Bank's Primary Objectives

In: CNB Financial Stability Report 2014/2015

Author

Listed:
  • Jan Frait
  • Simona Malovana
  • Vladimir Tomsik

Abstract

This article is concerned with the interaction of monetary and macroprudential policies at different stages of the financial and business cycle. We focus on identifying related channels of transmission of the two policies and potential feedback between them. Our methodology allows us to obtain information from large number of variables and thus provides a comprehensive picture of the potential impacts of a monetary easing and a macroprudential tightening. The analysis reveals that in some situations monetary policy and macroprudential policy can come into conflict in the pursuit of their objectives. It is therefore crucial to coordinate them and seek an optimal policy mix based on a detailed assessment of the economic outlook.

Suggested Citation

  • Jan Frait & Simona Malovana & Vladimir Tomsik, 2015. "The Interaction of Monetary and Macroprudential Policies in the Pursuit of the Central Bank's Primary Objectives," Occasional Publications - Chapters in Edited Volumes, in: CNB Financial Stability Report 2014/2015, chapter 0, pages 110-120, Czech National Bank.
    • Handle: RePEc:cnb:ocpubc:fsr1415/1
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    References listed on IDEAS

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    8. Tobias Adrian & Hyun Song Shin, 2010. "The Changing Nature of Financial Intermediation and the Financial Crisis of 2007–2009," Annual Review of Economics, Annual Reviews, vol. 2(1), pages 603-618, September.
    9. Jose M. Berrospide & Rochelle M. Edge, 2010. "The Effects of Bank Capital on Lending: What Do We Know, and What Does It Mean?," International Journal of Central Banking, International Journal of Central Banking, vol. 6(34), pages 1-50, December.
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    Cited by:

    1. Malovaná, Simona & Frait, Jan, 2017. "Monetary policy and macroprudential policy: Rivals or teammates?," Journal of Financial Stability, Elsevier, vol. 32(C), pages 1-16.
    2. Katerina Arnostova & Tomas Adam & Oxana Babecka Kucharcukova & Jan Babecky & Sona Benecka & Jan Bruha & Jan Frait & Tomas Holub & Eva Hromadkova & Lubos Komarek & Zlatuse Komarkova & Petr Kral & Ivana, 2018. "Analyses of the Czech Republic's Current Economic Alignment with the Euro Area 2018," Occasional Publications - Edited Volumes, Czech National Bank, number as18 edited by Katerina Arnostova & Lucie Matejkova, January.
    3. Jiří Schwarz & Martin Pospíšil, 2018. "Bankruptcy, Investment, and Financial Constraints: Evidence from the Czech Republic," Eastern European Economics, Taylor & Francis Journals, vol. 56(2), pages 99-121, March.

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