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On the Interplay between Monetary Policy and Macroprudential Policy: A Simple Analytical Framework

Author

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  • Øistein Røisland

    (Norges Bank (Central Bank of Norway))

Abstract

The paper provides a simple analytical framework for analyzing the interplay between monetary policy and macroprudential policy. Three questions are analyzed: (i) Under which assumptions is coordination necessary to implement an optimal policy mix? (ii) Are the two policy instruments substitutes or complements, i.e. should they move in opposite or the same direction as response to a shock? (iii) Can "leaning against the wind" in monetary policy lead to a negative inflation bias?

Suggested Citation

  • Øistein Røisland, 2017. "On the Interplay between Monetary Policy and Macroprudential Policy: A Simple Analytical Framework," Working Paper 2017/18, Norges Bank.
  • Handle: RePEc:bno:worpap:2017_18
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    File URL: http://www.norges-bank.no/en/Published/Papers/Working-Papers/2017/182017/
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    More about this item

    Keywords

    Monetary policy; Macroprudential policy; Coordination;

    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
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination

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