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Marrying Monetary Policy with Macroprudential Regulation: Exploration of Issues

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  • Don Nakornthab Phurichai
  • Rungcharoenkitkul

Abstract

Since the eruption of the global financial crisis in 2008, macroprudential regulation has become a mantra in the regulatory world. The soon-to-be-widespread adoption of macroprudential tools will inevitably affect the dynamics of the economy and consequently have a direct bearing on the conduct of monetary policy. This paper explores theoretically several issues surrounding the interplay between macroprudential regulation and monetary policy. Among the key issues examined are the economic stabilization role of rule-based macroprudential policy, the implications of a countercyclical capital requirement on the monetary transmission mechanism, and the optimal policy combination.

Suggested Citation

  • Don Nakornthab Phurichai & Rungcharoenkitkul, 2010. "Marrying Monetary Policy with Macroprudential Regulation: Exploration of Issues," Occasional Papers, South East Asian Central Banks (SEACEN) Research and Training Centre, number occ49, April.
  • Handle: RePEc:sea:opaper:occ49
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    File URL: http://www.seacen.org/GUI/pdf/publications/occasional/2010/occ49/occ49_complete.pdf
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    References listed on IDEAS

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    3. Claudio Borio, 2007. "Change and Constancy in the Financial System: Implications for Financial Distress and Policy," RBA Annual Conference Volume,in: Christopher Kent & Jeremy Lawson (ed.), The Structure and Resilience of the Financial System Reserve Bank of Australia.
    4. Jung-Gun Oh, 1992. "Interest Investment and Saving: A Causality Analysis," Staff Papers, South East Asian Central Banks (SEACEN) Research and Training Centre, number sp47, April.
    5. Robert G. King & Ross Levine, 1993. "Finance and Growth: Schumpeter Might Be Right," The Quarterly Journal of Economics, Oxford University Press, vol. 108(3), pages 717-737.
    6. Ross Levine, 1997. "Financial Development and Economic Growth: Views and Agenda," Journal of Economic Literature, American Economic Association, vol. 35(2), pages 688-726, June.
    7. Corrinne Ho & Robert N. McCauley, 2003. "Living with flexible exchange rates: issues and recent experience in inflation targeting emerging market economies," BIS Working Papers 130, Bank for International Settlements.
    8. M S Mohanty & Philip Turner, 2008. "Monetary policy transmission in emerging market economies: what is new?," BIS Papers chapters,in: Bank for International Settlements (ed.), Transmission mechanisms for monetary policy in emerging market economies, volume 35, pages 1-59 Bank for International Settlements.
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    Cited by:

    1. Andrew Filardo, 2012. "Ensuring price stability in post-crisis Asia: lessons from the recovery," BIS Working Papers 378, Bank for International Settlements.

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