Strategic interaction between monetary and macroprudential policies under loan guarantees

Resumo

In this paper I present a model with financial frictions and loan guarantees to study the entanglement between the transmission mechanisms of monetary and macroprudential policies. The generated results shows that adding a credit guarantee scheme as a tool for financial stabilization can improve the responses of the economy in face of risk shocks. In this sense, this type of instrument is able to recover the “divine coincidence” of classical monetary policy models, eliminating policy trade-offs and smoothing the responses of output, investment, and capital in a scenario of greater financial instability. Furthermore, a formal game is proposed to study the relevance of coordination failure in a regime with separate authorities. I find that the Nash Equilibrium generates worse welfare costs compared to a lean against the wind Central Bank. However, if cooperation is feasible, then it is possible to implement the optimal policy using separate instruments.

Ficha do documento

Tipo

Dissertação

Ano

2023

Instituição

Fundação Getulio Vargas

Fonte

Repositório da FGV

Idioma

Inglês

Acesso

Não informado

Identificador

oai:repositorio.fgv.br:10438/33807

Temas

Economia

Palavras-chave

Monetary policyLoan guaranteesCoordination failurePolítica monetáriaGarantia de créditoFalha de coordenaçãoEconomiaEmpréstimo bancárioMacroeconomiaCréditos