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A primer on macroprudential policy

Listed author(s):
  • Jean-Christophe Poutineau


    (CREM - Centre de Recherche en Economie et Management - UR1 - Université de Rennes 1 - Université de Caen Basse-Normandie - CNRS - Centre National de la Recherche Scientifique)

  • Gauthier Vermandel


    (CREM - Centre de Recherche en Economie et Management - UR1 - Université de Rennes 1 - Université de Caen Basse-Normandie - CNRS - Centre National de la Recherche Scientifique)

This article introduces macroprudential policy using a static New Keynesian Macroeconomics model with financial frictions. Researchers analyze two related questions: First, they show how the procyclicality 5 of financial factors, captured by the financial accelerator, amplifies the transmission of supply and demand shocks and impacts the intuition they get from a basic intermediate macroeconomics. Second, adopting an optimal policy perspective, they show how a policymaker may use macroprudential policy to complete monetary policy measures. Following the Mundellian Policy Assignment principle, macroprudential policy should be specialized to address the procyclicality problem to 10 suppress welfare losses associated with the building of financial imbalances, thus helping monetary policy to concentrate on the output inflation tradeoff.

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Paper provided by HAL in its series Post-Print with number halshs-01092211.

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Date of creation: 2015
Publication status: Published in Journal of Economic Education, Taylor & Francis (Routledge), 2015, 46 (1), pp.1-15. <10.1080/00220485.2014.980527>
Handle: RePEc:hal:journl:halshs-01092211
DOI: 10.1080/00220485.2014.980527
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