Macroprudential regulation, credit spreads and the role of monetary policy.

Autor: Tayler, William J., Zilberman, Roy
Zdroj: Journal of Financial Stability; Oct2016, Vol. 26, p144-158, 15p
Abstrakt: We study the macroprudential roles of bank capital regulation and monetary policy in a borrowing cost channel model with endogenous financial frictions, driven by credit risk, bank losses and bank capital costs. These frictions induce financial accelerator mechanisms and motivate the examination of a macroprudential toolkit. Following credit shocks, countercyclical regulation is more effective than monetary policy in promoting price, financial and macroeconomic stability. For supply shocks, combining macroprudential regulation with a stronger anti-inflationary policy stance is optimal. The findings emphasize the importance of the Basel III accords in alleviating the output-inflation trade-off faced by central banks, and cast doubt on the desirability of conventional (and unconventional) Taylor rules during periods of financial distress. [ABSTRACT FROM AUTHOR]
Databáze: Supplemental Index
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