The present study aims at developing an aggregate financial stability index by using banking sector indices to assess financial stability and examine if the variable of credit-to-GDP gap corresponds to its long-term trend which represents the macro-prudential indicator has co-movement with the built financial stability index? To this end, monthly banking balance sheet data were collected from t...

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 ...

This study aimed to examine the effects of monetary policy on macroeconomic variables with regard to the collateral constraint. For this purpose, a dynamic stochastic general equilibrium (DSGE) was developed for Iran’s economic status. Two scenarios were considered as to account for the behavior of the central bank. In the first scenario, the monetary rule is modeled according to the GDP gap an...

This paper examines the interactions between financial development, economic growth and (macro)prudential policy on a sample of 12 euro area countries. Our main takeaway is that active supports positive finance-growth nexus instead disrupting it. These benefits are found to be more likely materialize during tightening measures not easing. result conditional ability curb excess credit mitigate s...

Macro-prudential authorities need to assess medium-term downside risks the real economy, caused by severe financial shocks. Before activating policy measures, they also consider their short-term negative impact. This gives rise a risk management problem, an inter-temporal trade-off between expected growth and risk. Predictive distributions are estimated with structural quantile vector autoregre...

Not so very long ago, I argued that it was possible to characterise modern monetary and fiscal policy in the UK as a function of three key events: exit from European Exchange Rate Mechanism September 1992, election ‘New Labour’ May 1997 global financial crisis 2007–2009. The first led adoption domestic inflation target October second operational independence Bank England establishment Monetary ...