UID:
edocfu_9958071434602883
Format:
1 online resource (45 p.)
ISBN:
1-4843-0312-1
,
1-4843-0289-3
,
1-4843-0354-7
Series Statement:
IMF Working Papers
Content:
We study interactions between monetary and macroprudential policies in a model with nominal and financial frictions. The latter derive from a financial sector that provides credit and liquidity services that lead to a financial accelerator-cum-fire-sales amplification mechanism. In response to fluctuations in world interest rates, inflation targeting dominates standard Taylor rules, but leads to increased volatility in credit and asset prices. The use of a countercyclical macroprudential instrument in addition to the policy rate improves welfare and has important implications for the conduct of monetary policy. “Leaning against the wind” or augmenting a standard Taylor rule with an argument on credit growth may not be an effective policy response.
Note:
Description based upon print version of record.
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Cover; Contents; I. Introduction; Figures; Figure 1. Interest Rates and Reserve Requirements in Selected Emerging Markets; II. Model Economy; A. Households; B. Production and Capital Accumulation; C. Financial Sector; Figure 2. Timing of Events; D. Aggregation and Price Rigidities; Figure 3. Liquidity Intermediary Allocation Problem; E. Alternative Monetary and Macro-Prudential Frameworks; III. Baseline Calibration and Welfare Analysis Methodology; IV. Policy Responses to Capital Inflows and Reversals; Figure 4. Expected and Materialized Path for the Foreign Interest Rate; Tables
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Table 1. Welfare Comparison between the standard Taylor Type Rule and the Inflation Targeting RegimeFigure 5. Comparing the Responses under Natural, Taylor Type Rule, and IT Regime; Table 2. Welfare Comparison between Inflation Targeting (IT) Regime and the Augmented Taylor Type Rule; Figure 6. Comparing the Responses under Natural, IT Regime, and Augmented Taylor; Figure 7. Comparing Responses under IT Regime, Taylor Type Rules, and Countercyclical Reserve Requirement; V. Robustness; A. Foreign Borrowing and Dollarization
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Table 3. Welfare Comparison between the Augmented Taylor Type Rule and the Inflation Targeting with Countercyclical Reserve RequirementTable 4. Welfare Comparison with Foreign Borrowing; Figure 8. The Role of Direct Foreign Funding for Lending Intermediaries and Entrepreneurs; Figure 9. The Role of Partial Dollarization in the Entrepreneurs' Loan; B. Wage Rigidities; Table 5. Welfare Comparison with Partial Dollarization in the Entrepreneurs' Loans; Table 6. Welfare Comparison with Wage Rigidities; Figure 10. The Role of Wage Rigidities; C. Larger Excess Reserves
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Table 7. Welfare Comparison with Higher Excess ReservesFigure 11. The Role of Higher Excess Reserves; VI. Conclutions; References; Appendixes; Appendix I. The Lending Problem; Appendix II. The Problem of Liquidity Intermediaries; Appendix III. Price Rigidities, the Phillips Curve, and Aggregation of Final Goods Demand; Appendix IV. Complete Set of Equilibrium Conditions; Appendix V. Extension with Foreign Funding for Lending Intermediaries and Enterpreneurs; Appendix VI. Financial Dollarization of the Entrepreneurs' Loans
,
English
Additional Edition:
ISBN 1-4843-0287-7
Language:
English
