A Research of the Effectiveness of Macroprudential Management and Its Coordination with Monetary Policy
- SU Jiasheng, WANG Xi
- Sun Yat-sen University, 510275.
As different policy departments exist, the macroprudential management and monetary policy may have conflicts, which haven't been observed by domestic research. Hereby, we construct a new Keynesian DSGE model involving financial friction to describe two countercyclical policy instruments, the households' loan-to-value ratio and banks' capital requirement ratio, aiming to investigate the effect of Chinese macroprudential management. Besides, we suppose the monetary policy is conducted by the monetary department and the macroprudential management by the macroprudential department. Then we consider the coordination effect of the two departments by a continuous game theory's framework. It's shown that: (1) Macroprudential management can mitigate the economic fluctuation against technology and financial shock unless fiscal shock. (2)Compared to uncoordinated case, the policy coordination between monetary and macroprudential departments can significantly decrease the welfare loss. Hence, a higher level of management and reform is necessary, which can ease the contradictions between two departments' targets and instruments.
- Macroprudential Management, Monetary Policy, Policy Coordination, DSGE