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Informality, Frictions, and Macroprudential Policy
Author:
Moez Ben Hassine null

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Mr. Nooman Rebei
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Series:
IMF Working Papers
Volume/Issue:
Volume 2019: Issue 255
Language:
English
Publication Date:
27 Nov 2019
DOI:
https://doi.org/10.5089/9781498320856.001
ISBN:
9781498320856
ISSN:
1018-5941
Pages:
37
Keywords:
WP; interest rate; monetary policy; welfare gain; physical capital; inflation rate; adjustment cost; open economy; production function; interest rate rule; marginal utility; inflation targeting policy; nominal exchange rate; demand shock; Macroprudential policy; Self-employment; Consumption; Housing
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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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We analyze the effects of macroprudential policies through the lens of an estimated dynamic stochastic general equilibrium (DSGE) model tailored to developing markets. In particular, we explicitly introduce informality in the labor and goods markets within a small open economy embedding financial frictions, nominal and real rigidities, labor search and matching, and an explicit banking sector. We use the estimated version of the model to run welfare analysis under optimized monetary and macroprudential rules. Results show that although informality reduces the efficiency of macroprudential policies following a convex fashion, combining the latter with an inflation targeting objective could be beneficial.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund