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Monetary and Macroprudential Policy Games in a Monetary

Author

Listed:
  • Richard Dennis

    (University of Glasgow)

  • Pelin Ilbas

    (National Bank of Belgium)

Abstract

We use the two-country model of the euro area developed by Quint and Rabanal (2014)to study policymaking in the European Monetary Union (EMU). In particular, we focus on strategic interactions: 1) between monetary policy and a common macroprudential authority, and; 2) between an EMU-level monetary authority and regional macroprudential authorities. In the .rst case, price stability and .nancial stability are pursued at the EMU level, while in the second case each macroprudential authority adopts region-speci.c objectives. We compare cooperative equilibria in the simultaneous-move and leadership solutions, each obtained assuming policy iscretion. Further, we assess the e¤ects on policy performance of assigning shared objectives across policymakers and of altering the level of importance attached to various policy objectives.

Suggested Citation

  • Richard Dennis & Pelin Ilbas, 2016. "Monetary and Macroprudential Policy Games in a Monetary," Working Paper Research 304, National Bank of Belgium.
    • Handle: RePEc:nbb:reswpp:201610-304
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    File URL: https://www.nbb.be/doc/ts/publications/wp/wp304en.pdf
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    References listed on IDEAS

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    2. Rubio, Margarita & Carrasco-Gallego, José A., 2014. "Macroprudential and monetary policies: Implications for financial stability and welfare," Journal of Banking & Finance, Elsevier, vol. 49(C), pages 326-336.
    3. Mr. Scott Roger & Mr. Jan Vlcek, 2011. "Macroeconomic Costs of Higher Bank Capital and Liquidity Requirements," IMF Working Papers 2011/103, International Monetary Fund.
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    8. Andrea Gerali & Stefano Neri & Luca Sessa & Federico M. Signoretti, 2010. "Credit and Banking in a DSGE Model of the Euro Area," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 42(s1), pages 107-141, September.
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    12. Kannan Prakash & Rabanal Pau & Scott Alasdair M., 2012. "Monetary and Macroprudential Policy Rules in a Model with House Price Booms," The B.E. Journal of Macroeconomics, De Gruyter, vol. 12(1), pages 1-44, June.
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    Cited by:

    1. van Holle, Frederiek, 2017. "Essays in empirical finance and monetary policy," Other publications TiSEM 30d11a4b-7bc9-4c81-ad24-5, Tilburg University, School of Economics and Management.
    2. R. Wouters, 2016. "The transmission mechanism of new and traditional instruments of monetary and macroprudential policy," Economic Review, National Bank of Belgium, issue iii, pages 105-117, December.

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    More about this item

    Keywords

    Monetary policy; macroprudential policy; policy coordination;
    All these keywords.

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • 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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