While conventional monetary policy maintains its role in counteracting inflation, there are doubts that it is sufficient to guard against the risks of financial instability. It has been debated whether monetary policy should lean against the wind, i.e., if central banks should also respond to...

The frequencies at which prices and wages are adjusted, interpreted as price and wage flexibility, are key elements in workhorse models used for policy analysis. Yet, there is little evidence regarding the relationship between these two sources of nominal rigidities. Using two large and highly...

We study interactions between monetary and macroprudential policies in a model with nominal and financial frictions. The latter derive from a financial sector that provides credit and liquidity services that lead to a financial accelerator-cum-fire-sales amplification mechanism. In response to...

A BMW model is augmented with a credit market affected by banks' balance sheet and used to assess the dynamic performance of an economy in the face of demand and financial shocks under different assumptions about the interactions between monetary and macroprudential policy. We show that the...

We analyse the interaction between monetary and macroprudential policies in the euro area by means of a two-country DSGE model with financial frictions and cross-border spillover effects. We calibrate the model for the four largest euro area countries (i.e. Germany, France, Italy, and Spain),...

We estimate the Smets and Wouters (2007) model augmented with the Gertler and Karadi (2011) financial intermediation sector on US data by using real and financial observables. Given the framework of the estimated model, we address the question whether and how standard monetary policy should...

This paper studies the trade-offs that can arise between inflation targeting and financial stability objectives. We use a simple framework to conduct macroeconomic policy analysis under three strategies: (1) a benchmark case where monetary policy pursues traditional price stability objectives;...

The global financial crisis of late 2008 could not have provided more convincing evidence that price stability is not a sufficient condition for financial stability. In order to attain both, central banks must develop macroprudential instruments in order to prevent the occurrence of systemic...

We estimate the Smets and Wouters (2007) model augmented with the Gertler and Karadi (2011) financial intermediation sector on US data by using real and financial observables. Given the framework of the estimated model, we address the question whether and how standard monetary policy should...

We use a microfounded dynamic stochastic general equilibrium (DSGE) model with banks to study interactions between monetary and macroprudential policies in a small open economy. The model is calibrated/estimated for Korea. Cooperation of monetary and macroprudential policies is optimal under a...