This paper examines the macroprudential roles of bank capital regulation and monetary policy in a Dynamic Stochastic General Equilibrium model with endogenous financial frictions and a borrowing cost channel. We identify various transmission channels through which credit risk, commercial bank...

How to conduct macro-prudential regulation? How to coordinate monetary policy and macro-prudential policy? To address these questions, I develop a continuous-time New Keynesian economy in which a financial intermediary sector is subject to a leverage constraint. Coordination between monetary and...

After the destructive impact of the global financial crisis of 2008, many believe that pre-crisis financial market regulation did not take the "big picture" of the system suffciently into account and, subsequently, financial supervision mainly "missed the forest for the trees". As a result, the...

The recent financial crisis has highlighted the interconnectedness between macroeconomic and financial stability and has raised the question of whether and how to combine the corresponding main policy instruments (interest rate and bank-capital requirements). This paper offers a characterization...

This paper discusses the macroeconomic effects of China's informal banking regulatory tool “window guidance,” introduced in 1998. Using an open-economy DSGE model that includes the commercial banking sector, we study the stabilizing effects of this non-standard quantitative monetary policy...

This paper discusses the macroeconomic effects of China's informal banking regulatory tool “win-dow guidance,” introduced in 1998. Using an open-economy DSGE model that includes the com-mercial banking sector, we study the stabilizing effects of this non-standard quantitative monetary policy...

How to conduct macro-prudential regulation? How to coordinate monetary policy and macro-prudential policy? To address these questions, I develop a continuous-time New Keynesian economy in which a financial intermediary sector is subject to a leverage constraint. Coordination between monetary and...

This paper studies the links among credit supply expansion, commercial bank asset account structures, and the housing boom preceding the 2007-2009 financial crisis. We propose a real business cycle model with a housing market and financial intermediaries (banks) subject to leverage constraints....

The fact that money, banking, and financial markets interact in important ways seems self-evident. The theoretical nature of this interaction, however, has not been fully explored. To this end, we integrate the Diamond (1997) model of banking and financial markets with the Lagos and Wright...

At the heart of the eurozone crisis lies the inability of the current monetary policy framework to avert the on-going financial disintegration and to break the vicious circle that ties up banks and governments in a death grip (liquidity ring-fencing), which does not allow policies to deal...