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A Primer on Macroprudential Policy

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  • Jean-Christophe Poutineau
  • Gauthier Vermandel

Abstract

This article introduces macroprudential policy using a static New Keynesian Macroeconomics model with financial frictions. The authors analyze two related questions: First, they show how the procyclicality of financial factors, captured by the financial accelerator, amplifies the transmission of supply and demand shocks and impacts the intuition they get from a basic intermediate macroeconomics. Second, adopting an optimal policy perspective, they show how a policymaker may use macroprudential policy to complete monetary policy measures. Following the Mundellian Policy Assignment principle , macroprudential policy should be specialized to address the procyclicality problem to suppress welfare losses associated with the building of financial imbalances, thus helping monetary policy to concentrate on the output inflation tradeoff.

Suggested Citation

  • Jean-Christophe Poutineau & Gauthier Vermandel, 2015. "A Primer on Macroprudential Policy," The Journal of Economic Education, Taylor & Francis Journals, vol. 46(1), pages 68-82, March.
    • Handle: RePEc:taf:jeduce:v:46:y:2015:i:1:p:68-82
    DOI: 10.1080/00220485.2014.980527
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    References listed on IDEAS

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    1. Friedman, Benjamin Morton, 2013. "The Simple Analytics of Monetary Policy: A Post-Crisis Approach," Scholarly Articles 14117757, Harvard University Department of Economics.
    2. Carl E. Walsh, 2002. "Teaching Inflation Targeting: An Analysis for Intermediate Macro," The Journal of Economic Education, Taylor & Francis Journals, vol. 33(4), pages 333-346, December.
    3. Peter Bofinger & Eric Mayer & Timo Wollmershäuser, 2006. "The BMW Model: A New Framework for Teaching Monetary Economics," The Journal of Economic Education, Taylor & Francis Journals, vol. 37(1), pages 98-117, January.
    4. Benjamin M. Friedman, 2013. "The Simple Analytics of Monetary Policy: A Post-Crisis Approach," The Journal of Economic Education, Taylor & Francis Journals, vol. 44(4), pages 311-328, October.
    5. Benjamin M. Friedman, 2013. "The Simple Analytics of Monetary Policy: A Post-Crisis Approach," NBER Working Papers 18960, National Bureau of Economic Research, Inc.
    6. Sebastien Buttet & Udayan Roy, 2014. "A Simple Treatment of the Liquidity Trap for Intermediate Macroeconomics Courses," The Journal of Economic Education, Taylor & Francis Journals, vol. 45(1), pages 36-55, March.
    7. Michael Woodford, 2010. "Financial Intermediation and Macroeconomic Analysis," Journal of Economic Perspectives, American Economic Association, vol. 24(4), pages 21-44, Fall.
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    Cited by:

    1. Moisă ALTĂR & Alexie ALUPOAIEI & Adam ALTĂR-SAMUEL, 2017. "Dynamics in a New-Keynesian Model with Financial Accelerator and Uncertainty," ECONOMIC COMPUTATION AND ECONOMIC CYBERNETICS STUDIES AND RESEARCH, Faculty of Economic Cybernetics, Statistics and Informatics, vol. 51(2), pages 5-22.
    2. Federico Bassi & Andrea Boitani, 2021. "Monetary and macroprudential policy: The multiplier effects of cooperation," DISCE - Working Papers del Dipartimento di Economia e Finanza def110, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
    3. Salim Dehmej & Leonardo Gambacorta, 2019. "Macroprudential Policy in a Monetary Union," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 61(2), pages 195-212, June.

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