Skip to main content Accessibility help

We use cookies to distinguish you from other users and to provide you with a better experience on our websites. Close this message to accept cookies or find out how to manage your cookie settings.

Close cookie message
×
Hostname: page-component-cd9895bd7-lnqnp Total loading time: 0 Render date: 2025-01-03T11:37:53.394Z Has data issue: false hasContentIssue false

3 - Financial Intermediation and Monetary and Macroprudential Policies

Published online by Cambridge University Press:  09 August 2018

By
Stefano Neri
Edited by
Paul Mizen ,
Margarita Rubio  and
Philip Turner
Paul Mizen
Affiliation:
University of Nottingham
Margarita Rubio
Affiliation:
University of Nottingham
Philip Turner
Affiliation:
Universität Basel, Switzerland
Get access

Summary

New-Keynesian Dynamic Stochastic General Equilibrium (NK-DSGE) models have been severely criticised after the outbreak of the global financial crisis in 2008. Intensive research is underway in both academia and central banks to incorporate a more realistic modelling of financial intermediation and a role for macroprudential policy. Given the technical and computational difficulties arising from modelling systemic risk, it may take some time before economists develop new models that allow a comprehensive and integrated approach to the study of the linkages between financial intermediation and the real economy and the role of policies to promote and preserve financial stability. In the meantime, existing models can be used for the analysis of monetary and macroprudential policy and their interaction.

Type
Chapter
Information
Macroprudential Policy and Practice , pp. 61 - 86
Publisher: Cambridge University Press
Print publication year: 2018

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Adrian, T. and Shin, H. S. (2010). ‘Liquidity and Leverage’, Journal of Financial Intermediation, vol 19, no 3, 418–437.Google Scholar
Angelini, P., Enria, A., Neri, S., Panetta, F. and Quagliariello, M. (2011). ‘Pro-cyclicality of capital requirements: Is it a problem? How to fix it?’, in Posen, Adam, Pisani-Ferry, Jean, Saccomanni, Fabrizio, eds. ‘An ocean apart? Comparing Transatlantic Responses to the Financial Crisis’, Brussels, Bruegel Institute, 263–311.Google Scholar
Angelini, P. and Gerali, A. (2012). ‘Banks’ Reactions to Basel-III’, Banca d’Italia Discussion papers, no 876.Google Scholar
Angelini, P., Neri, S. and Panetta, F. (2014). ‘The interaction between capital requirements and monetary policy’, Journal of Money, Credit and Banking, vol 46, no 6, 1073–1112.Google Scholar
Angelini, P., Nicoletti-Altimari, S. and Visco, I. (2012). ‘Macroprudential, microprudential and monetary policies: Conflicts, complementarities and trade-offs’, Banca d’Italia, Occasional papers, no 140.Google Scholar
Angeloni, I. and Faia, E. (2009). ‘A tale of two policies: Prudential regulation and monetary policy with fragile banks’, Working Paper, no 1569, Kiel Institute for the World Economy.Google Scholar
Basel Committee on Banking Supervision (2010). ‘An assessment of the long-term economic impact of stronger capital and liquidity requirements’, Bank for International Settlements.Google Scholar
Bean, C., Paustian, M., Penalver, A. and Taylor, T. (2010). ‘Monetary policy after the fall’, Paper presented at the Federal Reserve Bank of Kansas City Annual Conference, Jackson Hole, Wyoming.Google Scholar
Beau, D., Clerc, L. and Mojon, B. (2011). ‘Macro-Prudential Policy and the Conduct of Monetary Policy’, Banque de France, Document de travail, no 390.Google Scholar
Benigno, G., Chen, H., Otrok, C., Rebucci, A. and Young, E. (2010). ‘Revisiting overborrowing and its policy implications’, CEPR Discussion Paper, no 7872.Google Scholar
Bernanke, B. S., Gertler, M. and Gilchrist, S. (1999). ‘The financial accelerator in a quantitative business cycle framework’, in Taylor, J. B. and Woodford, M., eds., Handbook of Macroeconomics, Vol 1C. Amsterdam: Elsevier Science, North–Holland, 1341–1393.Google Scholar
Bianchi, J. (2011). ‘Overborrowing and systemic externalities in the business cycle’, American Economic Review, vol 101, no 7, 3400–3426.Google Scholar
Bianchi, J. and Mendoza, E. G. (2011). ‘Overborrowing, financial crises and macroprudential policy’, International Monetary Fund, Working Paper, no 24.Google Scholar
Brunnermeier, M., Hansen, L. P., Kashyap, A., Krishnamurthy, A. and Lo, A. W. (2011). ‘Modeling and measuring systemic risk’, in Ten Years and Beyond: Economists Answer NSF’s Call for Long-Term Research Agendas, Schultze, C. L. and Newlon, D. H., eds., American Economic Association. Available at SSRN: http://ssrn.com/abstract=1886598.Google Scholar
Brunnermeier, M. and Sannikov, Y. (2014). ‘A macroeconomic model with a financial sector’, American Economic Review, vol 104, no 2, 379–421.Google Scholar
Buiter, W. (2009). ‘The unfortunate uselessness of most “state of the art” academic monetary economics’ available at http://www.voxeu.org.Google Scholar
Cahn, C., Matheron, J. and Sahuc, J.-G. (2014). ‘Assessing the macroeconomic effects of LTROS’, Banque de France working papers, no 528.Google Scholar
Cecchetti, S. G., Disyatat, P. and Kohler, M. (2009). ‘Integrating financial stability: New models for a new challenge’, prepared for the joint BIS-ECB Workshop on ‘Monetary policy and financial stability’, Basel, Switzerland, 10–11 September 2009.Google Scholar
Christiano, L., Eichenbaum, M. and Evans, C. (2005). ‘Nominal rigidities and the dynamic effects of a shock to monetary policy’, Journal of Political Economy, vol 113, no 1, 1–46.CrossRefGoogle Scholar
Christiano, L., Rostagno, M. and Motto, M. (2014). ‘Risk shocks’, American Economic Review, vol 104, no 1, 27–65.Google Scholar
Clerc, L., Derviz, A., Mendicino, C., Moyen, S., Nikolov, K., Stracca, L., Suarez, J. and Vardoulakis, A. P. (2015). ‘Capital regulation in a macroeconomic model with three layers of default’, International Journal of Central Banking, vol 11, no 3.Google Scholar
Cúrdia, V. and Woodford, M. (2010). ‘Credit spreads and monetary policy’, Journal of Money Credit and Banking, vol 42, no S1, p. 3–35.Google Scholar
De Grauwe, P. (2010). ‘The scientific foundation of dynamic stochastic general equilibrium (DSGE) models’, Public Choice, vol 144, no 3–4, 413–443.CrossRefGoogle Scholar
Diamond, D. W. and Rajan, R. G. (2000). ‘A theory of bank capital’, Journal of Finance, vol LV no 6, 2431–2465.Google Scholar
Diamond, D. W. and Rajan, R. G. (2001). ‘Liquidity risk, liquidity creation and financial fragility: A theory of banking’, Journal of Political Economy, vol 109, no 2, 287–327.Google Scholar
Fahr, S., Motto, R., Rostagno, M., Smets, F. and Tristani, O. (2011). ‘A monetary policy strategy in good and bad times: Lessons from the recent past’, European Central Bank, Working Paper, no 1336.Google Scholar
Fernández-Villaverde, J. and Rubio-Ramírez, J. F. (2005). ‘Estimating dynamic equilibrium economies: Linear versus nonlinear likelihood’, Journal of Applied Econometrics, vol 20, 891–910.Google Scholar
Galati, G. and Moessner, R. (2013). ‘Macroprudential policy – A literature review’, Journal of Economic Surveys, vol 27, no 5, 846–878.Google Scholar
Galí, J. (2008). Monetary Policy, Inflation and the Business Cycle: An Introduction to the New Keynesian Framework, Princeton: Princeton University Press.Google Scholar
Galí, J. (2009). ‘Interview with Andrew Scott’ (former Scientific Chair of the EABCN)’ at https://eabcn.org/podcast/andrew-scott-interviews-jordi-gali-upfGoogle Scholar
Gambacorta, L. and Signoretti, F. M. (2014). ‘Should monetary policy lean against the wind?’, Journal of Economic Dynamics and Control, vol 43, 146–174.Google Scholar
Gelain, P. and Ilbas, P. (2014). ‘Monetary and macroprudential policies in an estimated model with financial intermediation’, National Bank of Belgium, Working Paper, no 258.Google Scholar
Gerali, A., Neri, S., Sessa, L. and Signoretti, F. M. (2010). ‘Credit and banking in a DSGE model of the euro area’, Journal of Money, Credit and Banking, vol 42, no S1, 107–141.Google Scholar
Gersbach, H. (2011). ‘A framework for two macro policy instruments: Money and banking combined’, CEPR Policy Insight, no 58.Google Scholar
Gertler, M. and Karadi, P. (2011). ‘A model of unconventional monetary policy’, Journal of Monetary Economics, vol 58, 17–34.CrossRefGoogle Scholar
Gertler, M. and Kiyotaki, N. (2010). ‘Financial intermediation and credit policy in business cycle analysis’ in Friedman, B. M. and Woodford, M., eds., Handbook of Monetary Economics, vol 3A, 547–599, Amsterdam: Elsevier Press.Google Scholar
Gilchrist, S., Ortiz, A. and Zakrajsek, E. (2009). ‘Credit risk and the macroeconomy: Evidence from an estimated DSGE model’, mimeo, Boston University and Board of Governors of the Federal Reserve System.Google Scholar
Goodhart, C. and Tsomocos, D. P. (2011). ‘The role of default in macroeconomics,’ IMES Discussion Paper Series, 2011-E-23.Google Scholar
Guerrieri, L. and Iacoviello, M. (2015). ‘Occbin: A toolkit to solve models with occasionally binding constraints easily’, Journal of Monetary Economics, vol 70, 22–38.Google Scholar
Hansen, L. P. (2012). ‘Challenges in identifying and measuring systemic risk’, NBER Working Paper, no 18505.Google Scholar
Holló, D., Kremer, M. and Lo Duca, M. (2012). ‘CISS: A composite indicator of systemic stress in the financial system’, European Central Bank, Working Paper, no 1426.CrossRefGoogle Scholar
Hubrich, K. and Tetlow, R. J. (2015). ‘Financial stress and economic dynamics: The transmission of crises’, Journal of Monetary Economics, vol 70, 100–115.Google Scholar
Iacoviello, M. and Neri, S.. (2010). ‘Housing market spillovers: Evidence from an estimated DSGE model’, American Economic Journal: Macroeconomics, vol 2, 125–164.Google Scholar
Jeanne, O. and Korinek, A. (2010). ‘Managing credit booms and busts: A pigouvian taxation approach’, CEPR Discussion Paper, vol 8015.Google Scholar
Kydland, F. E. and Prescott, E. C. (1982). ‘Time to build and aggregate fluctuations’, Econometrica, vol 50, no 6, 1345–1370.Google Scholar
King, R. G., Plosser, C. I. and Rebelo, S. T. (1988). ‘Production, growth and business cycles: I. The basic neoclassical model’, Journal of Monetary Economics, vol 21, no 2–3, 195–232.Google Scholar
Kiyotaki, N. and Moore, J. (1997). ‘Credit cycles’, Journal of Political Economy, vol 105, no 2, 211–248.Google Scholar
Kocherlakota, N. (2010). ‘Modern macroeconomic models as tools for economic policy’, 2009 Annual Report Essay, Federal Reserve Bank of Minneapolis.Google Scholar
Lambertini, L., Mendicino, C. and Punzi, M. T. (2013). ‘Leaning against boom–Bust cycles in credit and housing prices’, Journal of Economic Dynamics and Control, vol 37, no 8, 1500–1522.CrossRefGoogle Scholar
Lucas, R. E. (2009). ‘In defense of the dismal science’, The Economist, 6 August.Google Scholar
Meh, C. A. and Moran, K. (2010). ‘The role of bank capital in the propagation of shocks’, Journal of Economic Dynamics and Control, vol 34, no 3, 555–576.CrossRefGoogle Scholar
Mendoza, E. G. (2010). ‘Sudden stops, financial crises and leverage’, American Economic Review, vol 100, no 5, 1941–1966.Google Scholar
Panetta, F., Angelini, P., Grande, G., Levy, A., Perli, R., Yesin, P., Gerlach, S., Ramaswamy, S. and Scatigna, M. (2006). ‘The recent behaviour of financial market volatility’, BIS Papers, no 29.Google Scholar
Quint, D. and Rabanal, P. (2014). ‘Monetary and macroprudential policy in an estimated DSGE model of the euro area’, International Journal of Central Banking, vol 10, no 2, 170–236.Google Scholar
Rotemberg, J. J. (1982). ‘Sticky prices in the United States’, Journal of Political Economy, vol 90, no 6, 1187–1211.Google Scholar
Rubio, M. and Carrasco-Gallego, J. A. (2014). ‘Macroprudential and monetary policies: Implications for financial stability and welfare’, Journal of Banking and Finance, vol 49, 326–336.Google Scholar
Schmitt-Grohé, S. and Uribe, M. (2008). ‘What’s news in business cycles’, NBER Working Paper, no 14215.Google Scholar
Schultze, C. L. and Newlon, D. H. (2011). ‘Ten years and beyond: Economists answer NSF’s call for long-term research agendas (Compendium)’, available at SSRN: http://ssrn.com/abstract=1886598.Google Scholar
Smets, F. and Wouters, R. (2003). ‘An estimated dynamic stochastic general equilibrium model of the euro area’, Journal of the European Economic Association, vol 97, no 3, 1123–1175.Google Scholar
Smets, F. and Wouters, R. (2007). ‘Shocks and frictions in US business cycles: A Bayesian DSGE approach’, American Economic Review, vol 97, no 3, 586–606.Google Scholar
Spaventa, L. (2009). ‘Economists and economics: What does the crisis tell us?’, CEPR Policy Insight, no 38, available at http://www.cepr.org/pubs/policyinsightsGoogle Scholar
The Economist (2009). ‘What went wrong with economics’, 16 July.Google Scholar
Visco, I. (2009). ‘The financial crisis and economists’ forecasts’, BIS Review, vol 49, 26–47.Google Scholar
Woodford, M. (2003). Interest and Prices: Foundations of a Theory of Monetary Policy, Princeton: Princeton University Press.Google Scholar
Woodford, M. (2010). ‘Financial intermediation and macroeconomic analysis’, Journal of Economic Perspectives, vol 24, no 4, 21–44.Google Scholar

Save book to Kindle

To save this book to your Kindle, first ensure [email protected] is added to your Approved Personal Document E-mail List under your Personal Document Settings on the Manage Your Content and Devices page of your Amazon account. Then enter the ‘name’ part of your Kindle email address below. Find out more about saving to your Kindle.

Note you can select to save to either the @free.kindle.com or @kindle.com variations. ‘@free.kindle.com’ emails are free but can only be saved to your device when it is connected to wi-fi. ‘@kindle.com’ emails can be delivered even when you are not connected to wi-fi, but note that service fees apply.

Find out more about the Kindle Personal Document Service.

Available formats
×

Save book to Dropbox

To save content items to your account, please confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your account. Find out more about saving content to Dropbox.

Available formats
×

Save book to Google Drive

To save content items to your account, please confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your account. Find out more about saving content to Google Drive.

Available formats
×