Macroprudential Rules in Small Open Economies

This document to evaluates the effectiveness, in terms of macroeconomic stability, of monetary policy rules and instruments of prudential supervision. Specifically, it seeks to distinguish between the gains of including in the standard monetary policy rule indicators of financial stress, such as credit growth -augmented rule-; and the gains of applying, in parallel to this augmented rule, a macroprudential instrument that allows a supervisory authority to affect credit interest rates directly. This analysis is performed using a dynamic stochastic general equilibrium model for a small open economy with financial rigidities, and is evaluated in the context of four shocks: financial, productivity, foreign demand and foreign interest rate. The model is calibrated in order to reflect the stylized facts of the Peruvian economy. The results obtained suggest that the effectiveness of the rules depends on the nature of the shock affecting the economy.