Monetary and macroprudential policies with direct and indirect financing : implications for macroeconomic stability

We assess the impact of macroprudential measures on macroeconomic stability using a DSGE model in which firms can access both direct and indirect financing. The model is calibrated with data from the euro area. We compare two different macroprudential rules (time-invariant and counter-cyclical) in the presence of a monetary policy shock and a macroprudential policy shock. We find that the macroprudential rule has little impact on the adjustment dynamics to a monetary and macroprudential shock. Direct financing increases the impact of monetary shocks on the volatility of financial variables but not on output and inflation. Simultaneous monetary policy and macroprudential policy shocks do not alter the reaction of inflation compared to a monetary policy shock but cause permanent output losses.