European Parliament Library

On the use of Monetary and Macroprudential Policies for Small Open Economies, Gülçin Özkan, Filiz Unsal

We explore optimal monetary and macroprudential policy rules for a small open economy. Delegating 'lean against the wind' squarely to macroprudential policy provides a more robust policy mix to shock uncertainty—(i) if macroprudential measures exist, there are no significant welfare gains from monetary policy reacting to credit growth under a financial shock; and (ii) monetary responses to financial markets could generate bigger welfare losses than macroprudential responses under different shocks. The source of outstanding liabilities also plays a role in the choice of policy instrument— macroprudential policies are particularly effective for emerging markets where foreign borrowing is sizeable
Table Of Contents
Cover; Content; 1. Introduction; 2. The Model; 2.1 Households; 2.2 Firms; 2.2.1 Production firms; 2.2.2 Importing firms; 2.2.3 Unfinished Capital Producing Firms; 2.3 Entrepreneurs; 2.3.1 Only Foreign Borrowing; 2.3.2 Only Domestic Borrowing; 2.3.3 Both Foreign and Domestic Borrowing; 2.4 Financial Intermediaries and Macroprudential Policy; 2.5 Monetary Policy; 3. Model Parametrization; 4. Model Dynamics; 4.1 Monetary and Macroprudential Policy; 4.2 Should Monetary Policy Lean Against the Wind?; 5. Optimal Policy and Welfare Evaluation; 5.1 Optimal Policy and Welfare Evaluation
Literary Form
non fiction
Description based upon print version of record
Physical Description
1 online resource (35 p.)
Specific Material Designation
Form Of Item

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