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Effects of Monetary and Macroprudential Policies on Financial Conditions: Evidence from the United States
Author:
Ms. Aleksandra Zdzienicka
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,
Ms. Sally Chen
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,
Federico Diaz Kalan
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,
Stefan Laseen
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, and
Katsiaryna Svirydzenka
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Series:
IMF Working Papers
Volume/Issue:
Volume 2015: Issue 288
Language:
English
Publication Date:
31 Dec 2015
DOI:
https://doi.org/10.5089/9781513519159.001
ISBN:
9781513519159
ISSN:
1018-5941
Pages:
29
Keywords:
WP; monetary policy shock; monetary policy; financial stability; spillovers; monetary policy policy change; monetary policy tightening; A. monetary policy; rate change; shocks affect; monetary policy action; Macroprudential policy instruments; Macroprudential policy; Credit; Financial sector stability; Bank credit; Global
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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The Global Financial Crisis has reopened discussions on the role of the monetary policy in preserving financial stability. Determining whether monetary policy affects financial variables domestically—especially compared to the effects of macroprudential policies— and across borders, is crucial in this context. This paper looks into these issues using U.S. exogenous monetary policy shocks and macroprudential policy measures. Estimates indicate that monetary policy shocks have significant and persistent effects on financial conditions and can attenuate long-term financial instability. In contrast, the impact of macroprudential policy measures is generally more immediate but shorter-lasting. Also, while an exogenous increase in U.S. monetary policy rates tends to reduce credit and house prices in other countries—with the effects varying with country-specific characteristics—an increase driven by improved U.S. economic conditions tends to have the opposite effect. Finally, we do not find evidence of cross-border spillover effects associated with U.S. macroprudential policies.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund