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Financial Frictions and Macroprudential Policy

  • Michal Brzoza-Brzezina

    (Narodowy Bank Polski and Warsaw School of Economics)

Incorporating financial intermediaries, with their ability to generate shocks and frictions, into macroeconomic models has recently gained substantial attention of the profession. In this commentary I ask whether the models we generated are ripe to provide valuable, quantitative advice to policymakers, especially those interested in implementing and conducting macroprudential policy. I concentrate on three features of standard DSGE models that, in my view, still make them hard to digest for policymakers: goals of macroprudential policy, assumed terms of lending, and spillovers.

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Article provided by International Journal of Central Banking in its journal International Journal of Central Banking.

Volume (Year): 10 (2014)
Issue (Month): 2 (June)
Pages: 249-261

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Handle: RePEc:ijc:ijcjou:y:2014:q:2:a:10
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  1. Alejandro Justiniano & Giorgio Primiceri & Andrea Tambalotti, 2015. "Household leveraging and deleveraging," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 18(1), pages 3-20, January.
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  11. Marco A. Espinosa-Vega & Juan Solé, 2011. "Cross-border financial surveillance: a network perspective," Journal of Financial Economic Policy, Emerald Group Publishing, vol. 3(3), pages 182-205, August.
  12. Michal Brzoza-Brzezina & Paolo Gelain & Marcin Kolasa, 2014. "Monetary and macroprudential policy with multi-period loans," Working Paper 2014/16, Norges Bank.
  13. Kolasa, Marcin & Lombardo, Giovanni, 2011. "Financial frictions and optimal monetary policy in an open economy," Working Paper Series 1338, European Central Bank.
  14. Brzoza-Brzezina, Michał & Kolasa, Marcin & Makarski, Krzysztof, 2015. "Monetary and macroprudential policy with foreign currency loans," Working Paper Series 1783, European Central Bank.
  15. Angeloni, Ignazio & Faia, Ester, 2013. "Capital regulation and monetary policy with fragile banks," Journal of Monetary Economics, Elsevier, vol. 60(3), pages 311-324.
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