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Optimal monetary and macroprudential policies for financial stability in a commodity-exporting economy

Author

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  • Ivan Khotulev

    (Bank of Russia, Russian Federation)

  • Konstantin Styrin

    (Bank of Russia, Russian Federation)

Abstract

We develop a model to analyze the optimal combination of macroprudential and monetary policies in a small open commodity-exporting economy. Unlike a closed economy, where monetary and macroprudential policies tend to be substitutes, in a small open economy the optimal policy mix depends on the specifics of shocks and economic structure. Monetary and macroprudential policies tend to be complements when the degree of pass-through of credit spreads into marginal costs and prices is sufficiently high, or when a credit boom is caused by a commodity boom, a fraction of consumers lacks access to financial markets, and the government follows a fiscal policy rule. The two policies are substitutes when the complementarity between domestic and imported production inputs is sufficiently high.

Suggested Citation

  • Ivan Khotulev & Konstantin Styrin, 2019. "Optimal monetary and macroprudential policies for financial stability in a commodity-exporting economy," Bank of Russia Working Paper Series wps52, Bank of Russia.
    • Handle: RePEc:bkr:wpaper:wps52
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    Cited by:

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    2. Ivan Aleksandrovich Kopytin & Nikolay Petrovich Pilnik & Ivan Pavlovich Stankevich, 2021. "Modelling Five Variables BVAR for Economic Policies and Growth in Azerbaijan, Kazakhstan and Russia: 2005 2020," International Journal of Energy Economics and Policy, Econjournals, vol. 11(5), pages 510-518.
    3. Tobal, Martin & Menna, Lorenzo, 2020. "Monetary policy and financial stability in emerging market economies," Latin American Journal of Central Banking (previously Monetaria), Elsevier, vol. 1(1).
    4. Henry Penikas, 2020. "IRB Asset and Default Correlation: Rationale for the Macroprudential Add-ons to the Risk-Weights," Bank of Russia Working Paper Series wps56, Bank of Russia.

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    More about this item

    Keywords

    Monetary policy; macroprudential policy; financial stability; commodity exporter; small open economy.;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G01 - Financial Economics - - General - - - Financial Crises
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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