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Potential Gains from Cooperation Between Monetary and Macroprudential Policies: The Case of an Emerging Economy

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  • Mădălin Viziniuc

Abstract

This article investigates whether cooperation between monetary and macroprudential policies can better stabilize an emerging economy. In this respect, it uses a dynamic stochastic general equilibrium model estimated for the Romanian economy. The model specifies two macroprudential instruments: the loan-to-value ratio and the capital requirements ratio. The simulations revealed that, given the entire stochastic environment, macroprudential instruments can indeed help stabilize the economy with smaller costs, and the loan-to-value instrument qualified as the best approach. Furthermore, in case of a financial shock, the use of credit requirements may be desirable because of their neutral effect on the exchange rate.

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  • Mădălin Viziniuc, 2017. "Potential Gains from Cooperation Between Monetary and Macroprudential Policies: The Case of an Emerging Economy," Eastern European Economics, Taylor & Francis Journals, vol. 55(5), pages 420-452, September.
  • Handle: RePEc:mes:eaeuec:v:55:y:2017:i:5:p:420-452
    DOI: 10.1080/00128775.2017.1345636
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