Macroprudential and monetary policy rules: a welfare analysis

Rubio, Margarita and Carrasco-Gallego, José A. (2015) Macroprudential and monetary policy rules: a welfare analysis. Manchester School, 83 (2). pp. 127-152. ISSN 1463-6786

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This paper studies the interaction between macroprudential and monetary policies, using a DSGE model with a housing market and collateral constraints. Monetary policy follows a standard Taylor rule for the interest rate. The macroprudential authority implements a Taylor-type rule for the loan-to-value, ratio reacting to output and house prices. Results show that introducing the macroprudential rule or extending the interest-rate rule to respond to house prices increases welfare, since it enhances financial stability. However, for the optimal policy mix, when both policies act together, monetary policy should ensure price stability while the macroprudential authority should safeguard financial stability.

Item Type: Article
Additional Information: This is the peer reviewed version of the following article: Rubio, M. and Carrasco-Gallego, J. A. (2015), Macroprudential and Monetary Policy Rules: a Welfare Analysis. The Manchester School, 83: 127–152. doi: 10.1111/manc.12078 which has been published in final form at This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving.
Keywords: Macroprudential, Monetary Policy, Collateral Constraint, Credit, Loan-to-Value, Financial Stability, House Prices
Schools/Departments: University of Nottingham, UK > Faculty of Social Sciences > School of Economics
Identification Number:
Depositing User: Kesaite, Viktorija
Date Deposited: 08 Sep 2015 08:16
Last Modified: 04 May 2020 17:01

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