Real Estate and the Great Crisis: Lessons for Macro-Prudential Policy

Optimal Macro-Prudential and Monetary Policy∗

This paper addresses two main questions. First, it examines the implications of financial frictions, embedded in a New Keynesian DSGE model with a banking sector, for the conduct of welfare-optimal monetary policy. Assuming only one monetary instrument, we analyse how financial frictions affect the gains from commitment and how different are the optimized simple rules with and without financial...

crisis: in search of externalities for macro prudential supervision

Stefan Gerlach: Macro prudential policy in Ireland

Today I will talk about “Macro prudential policy in Ireland.” Unfortunately, recent financial sector developments across the world have shown the serious consequences of macro prudential policy failures. Thus, there is little doubt that, in Ireland and elsewhere, much attention must and will be paid in the future to ensuring that macro prudential frameworks are effective so that we can avoid ev...

Prudential Policy For Peggers

This paper shows that in a small open economy with downward nominal wage rigidity pegging the nominal exchange rate creates a pecuniary externality. The externality causes unemployment, overborrowing, and depressed consumption. Ramsey optimal capital controls are shown to be prudential in the sense that they tax capital inflows in good times and subsidize external borrowing in bad times. Under ...

Implications of the Imperfect Deposit Market Structure for Micro and Macro Discretionary Prudential Policies

The aim of this study is to theoretically investigate the role of the bank deposit market structure in how effective micro and macro prudential policies in determining the regulatory capital of banks in combination with monetary policy. To achieve this, a partial equilibrium analytical framework has been developed that includes rational economic entities and the possibility of contagion risk in...