2020 | 302 | 2 | 43-69
Article title

Macroprudential and Monetary Policy Rules in a Model with Collateral Constraints

Title variants
Reguły polityki pieniężnej i makroostrożnościowej w modelu z ograniczeniami zastawowymi
Languages of publication
Porównujemy dobrobyt i makroekonomiczne skutki polityki pieniężnej i makroostrożnościowej, w szczególności opartej na wskaźniku LTV (loan-to-value). Budujemy model DSGE z ograniczeniami zastawowymi i dwoma typami agentów. Za jego pomocną badamy siedem reguł polityki reagujących na stopę wzrostu kredytu i fluktuacje cen zastawu. Pokazujemy, że reguła polityki pieniężnej, która stabilizuje ceny zastawu, skutkuje najwyższym poziomem dobrobytu, a także pozwala stabilizować produkt i inflację. Polityka makroostrożnościowa używająca wskaźnika LTV jest niemal zawsze zdominowana przez politykę stopy procentowej pod względem wariancji produktu i inflacji. W przypadku niemożliwości zastosowania reguł polityki pieniężnej oddzielna polityka makroostrożnościowa pozwala osiągnąć pewne korzyści w zakresie dobrobytu, ale nie są one znaczne.
We compare the welfare and macroeconomic effects of monetary policy and macroprudential policy, in particular one targeting the loan-to-value (LTV) ratio. We develop a dynamic stochastic general equilibrium (DSGE) model with collateral constraints and two types of agents. In this set-up, we study seven potential policy rules responding to credit growth and fluctuations in the prices of collateral. We show that monetary policy responding to deviations in collateral prices from their steady-state value results in the highest level of social welfare. It is also useful in stabilising output and inflation. A macroprudential policy using the LTV ratio as the instrument is dominated in terms of output and inflation stability by interest rate rules. If interest rate rules are not available, the LTV ratio can be used to improve welfare, but the gains are small.
Physical description
  • Angeloni I., Faia E. [2013], Capital regulation and monetary policy with fragile banks, Journal of Monetary Economics, 60 (3): 311–324.
  • Bernanke B., Gertler M. [2000], Monetary policy and asset price volatility, NBER Working Papers 7559, National Bureau of Economic Research, Inc.
  • Bernanke B. S., Gertler M., Gilchrist S. [1999], The financial accelerator in a quantitative busi¬ness cycle framework, in: J. B. Taylor, M. Woodford (eds.), Handbook of Macroeconomics, vol. 1 of Handbook of Macroeconomics, Elsevier, chapter 21: 1341–1393.
  • Benigno P., Woodford M. [2012], Linear-quadratic approximation of optimal policy problems, Journal of Economic Theory, Elsevier, 147 (1): 1–42.
  • Bocola L. [2016], The Pass-Through of Sovereign Risk, Journal of Political Economy, University of Chicago Press, 124 (4): 879–926.
  • Brzoza-Brzezina M., Kolasa M., Makarski K. [2013a], The anatomy of standard DSGE models with financial frictions, Journal of Economic Dynamics and Control, 37 (1): 32–51.
  • Brzoza-Brzezina M., Kolasa M., Makarski K. [2013b], Macroprudential policy and imbalances in the euro area, National Bank of Poland Working Papers 138, National Bank of Poland, Economic Institute.
  • Calvo G. A. [1983], Staggered prices in a utility-maximising framework, Journal of Monetary Economics, 12 (3): 383–398.
  • Cúrdia V., Woodford M. [2016], Credit frictions and optimal monetary policy, Journal of Monetary Economics, 84 (C): 30–65.
  • Cúrdia V., Woodford M. [2010], Credit Spreads and Monetary Policy, Journal of Money, Credit and Banking, 42 (s1): 3–35.
  • Galí J. [2015, 2nd ed.], Monetary Policy, Inflation and the Business Cycle: An Introduction to the New Keynesian Framework and Its Applications, Princeton, NJ, and Oxford, England, Princeton University Press.
  • Gerali A., Neri S., Sessa L., Signoretti F. M. [2010], Credit and banking in a DSGE model of the euro area, Journal of Money, Credit and Banking, 42 (s1): 107–141.
  • Gray D. F., Garcia C., Luna L., Restrepo J. [2011], Incorporation financial sector risk into mon¬etary policy models: application to Chile, IMF Working Paper, 11 (228).
  • Holden T. [2016a], Existence and uniqueness of solutions to dynamic models with occasionally binding constraints, EconStor Preprints 130142, Leibniz Information Centre for Econom¬ics (ZBW).
  • Holden T. [2016b], Computation of solutions to dynamic models with occasionally binding con¬straints, EconStor Preprints 130143, Leibniz Information Centre for Economics (ZBW).
  • Iacoviello M. [2005], House prices, borrowing constraints, and monetary policy in the business cycle, American Economic Review, 95 (3): 739–764.
  • Iacoviello M., Neri S. [2010], Housing market spillovers: Evidence from an estimated DSGE model, American Economic Journal: Macroeconomics, 2 (2): 125–64.
  • Jeanne O., Korinek A. [2018], Managing credit booms and busts: A Pigouvian taxation approach, Journal of Monetary Economics, 60 (3): 311–324.
  • Kaplan G., Moll B., Violante G. [2018], Monetary Policy According to HANK, American Eco¬nomic Review, 108 (3): 697–743.
  • Kiyotaki N., Moore J. [1997], Credit cycles, Journal of Political Economy, 105 (2): 211–248.
  • Kolasa M., Lombardo G. [2011], Financial frictions and optimal monetary policy in an open economy, Working Paper Series 1338, European Central Bank.
  • Lambertini L., Mendicino C., Punzi M. T. [2017], Expectations-driven cycles in the housing market, Economic Modelling, (60): 297–312.
  • Onali E. [2012], Moral hazard, dividends, and risk in banks, Journal of Business Finance & Account¬ing, 41: 128–155.
  • Rubio M., Carrasco-Gallego J. A. [2012], Macroprudential Measures, Housing Markets, and Monetary Policy, Dynare Working Papers 23, CEPREMAP.
  • Schmitt-Grohe S., Uribe M. [2004], Solving Dynamic General Equilibrium Models Using a Second-Order Approximation to the Policy Function, Journal of Economic Dynamics and Control, 28: 755–775.
  • Scott A., Rabanal P., Kannan P. [2009], Monetary and macroprudential policy rules in a model with house price booms, The B. E. Journal of Macroeconomics, 12: 1–44.
  • Smets F., Wouters R. [2003], An estimated dynamic stochastic general equilibrium model of the euro area, Journal of European Economic Association, 1 (5): 1123–1175.
Document Type
Publication order reference
YADDA identifier
JavaScript is turned off in your web browser. Turn it on to take full advantage of this site, then refresh the page.