Abstract
This paper examines the effectiveness of macroprudential policies in fostering financial stability within and across countries. We use a New Keynesian two-country DSGE model á la Gertler and Karadi (2011) with cross border loans between an emerging market (EM) and an advanced economy (AE). We compare three scenarios, the implementation of capital requirements in the AE, a levy tax on cross border loans in the EM and a de facto coordination of policies in both countries. We show when financial stability authorities conduct macroprudential policies across countries between the core and periphery, the results are highly effective in mitigating financial shocks in both jurisdictions, resulting in substantial welfare gains.
| Original language | English |
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| Title of host publication | Global Financial Spillovers and Coordination of Macroprudential Policies |
| Number of pages | 52 |
| Publication status | Published - 19 Dec 2018 |
| Event | Royal Economic Society 2018: PhD Meetings - London, London, UK United Kingdom Duration: 18 Dec 2018 → 19 Dec 2018 https://www.res.org.uk |
Conference
| Conference | Royal Economic Society 2018 |
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| Country/Territory | UK United Kingdom |
| City | London |
| Period | 18/12/18 → 19/12/18 |
| Internet address |
Keywords
- macroprudential policies
- DSGE models
- coordination of policies
ASJC Scopus subject areas
- Economics, Econometrics and Finance(all)