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The combined effects of monetary and macroprudential policies

Author

Listed:
  • Shuffield Seyram Asafo

    (University of Bologna)

  • Michal Moszynski

    (Nicolaus Copernicus University in Torun)

Abstract

The headwinds of the financial crisis have threatened the attainment of macroeconomic stability. As result, policymakers were confronted with finding the right policy mix that will ensure price stability, financial stability, and long-run growth. This paper contributes to the discussion by investigating the impact of simultaneous usage of monetary and macro-prudential policies in Central and Eastern Europe using a dynamic panel framework. Findings show that while an expansionary innovation to macro-prudential policy increases the loan-to-value ratio, and accelerates the credit-to-GDP gap, a contractionary shock to monetary policy hiked the policy interest rate, which depresses price inflation and economic activity. In terms of pass-through effects, property prices fell amid macro-prudential expansion and monetary tightening (no wealth effect was found).

Suggested Citation

  • Shuffield Seyram Asafo & Michal Moszynski, 2022. "The combined effects of monetary and macroprudential policies," SN Business & Economics, Springer, vol. 2(9), pages 1-20, September.
    • Handle: RePEc:spr:snbeco:v:2:y:2022:i:9:d:10.1007_s43546-022-00303-5
    DOI: 10.1007/s43546-022-00303-5
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    More about this item

    Keywords

    Panel data models; Instrumental variables; Interest rates; Financial markets and the macroeconomy; Monetary policy;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • C36 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Instrumental Variables (IV) Estimation
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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