This paper examines the interaction between monetary policy and macroprudential policy and whether policy makers should respond to financial imbalances. To address this issue, we build a dynamic general equilibrium model that features financial market frictions and financial shocks as well as...

After a survey of alternative theoretical approaches to modeling financial markets, the domestic and international financial linkages of major multicountry models are examined and assessed. The properties of these models are compared by calculating the slopes of their UI and BP curves for the...

After a survey of alternative theoretical approaches to modeling financial markets, the domestic and international financial linkages of major multicountry models are examined and assessed. The properties of these models are compared by calculating the slopes of their UI and BP curves for the...