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Asset Prices, Macro Prudential Regulation, and Monetary Policy

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  • Otaviano Canuto
  • Matheus Cavallari

Abstract

Confidence in combining inflation-targeting-cum-flexible-exchange-rate regimes with isolated microprudential regulation as a means to guarantee both macroeconomic and financial stability has been shattered by the scale and synchronization of the asset price booms and busts that preceded the global financial crisis. It has now become clear that if monetary policy makers and prudential regulators are to succeed in achieving stability, there can be no complacency regarding asset price cycles. This note explores some of the ways in which monetary policy can address asset price booms and busts through its integration with macroprudential regulation.
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Suggested Citation

  • Otaviano Canuto & Matheus Cavallari, 2013. "Asset Prices, Macro Prudential Regulation, and Monetary Policy," World Bank Publications - Reports 16116, The World Bank Group.
    • Handle: RePEc:wbk:wboper:16116
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    References listed on IDEAS

    as
    1. Canuto, Otaviano & Cavallari, Matheus, 2013. "Monetary policy and macroprudential regulation : whither emerging markets," Policy Research Working Paper Series 6310, The World Bank.
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    5. Ben S. Bernanke & Mark Gertler, 1999. "Monetary policy and asset price volatility," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 77-128.
    6. International Monetary Fund, 2011. "Macroprudential Policy: What Instruments and How to Use them? Lessons From Country Experiences," IMF Working Papers 2011/238, International Monetary Fund.
    7. Alan S. Blinder, 2010. "How Central Should the Central Bank Be?," Journal of Economic Literature, American Economic Association, vol. 48(1), pages 123-133, March.
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    Cited by:

    1. Sayan Banerjee, 2017. "A Financial Condition Index for India through Incorporation of Commercial Bank and Other Lending," International Journal of Economics and Financial Issues, Econjournals, vol. 7(4), pages 526-529.

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    More about this item

    Keywords

    Finance and Financial Sector Development - Debt Markets Banks and Banking Reform Private Sector Development - Emerging Markets Finance and Financial Sector Development - Currencies and Exchange Rates Economic Theory and Research Macroeconomics and Economic Growth;

    JEL classification:

    • E0 - Macroeconomics and Monetary Economics - - General
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • G2 - Financial Economics - - Financial Institutions and Services
    • G3 - Financial Economics - - Corporate Finance and Governance

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