Effects of Monetary and Macroprudential Policies on Financial Conditions: Evidence from the United States

By Aleksandra Zdzienicka, Sally Chen, Federico Diaz Kalan, Stefan Laseen, Katsiaryna Svirydzenka

December 31, 2015

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Aleksandra Zdzienicka, Sally Chen, Federico Diaz Kalan, Stefan Laseen, and Katsiaryna Svirydzenka. Effects of Monetary and Macroprudential Policies on Financial Conditions: Evidence from the United States, (USA: International Monetary Fund, 2015) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

The Global Financial Crisis has reopened discussions on the role of the monetary policy in preserving financial stability. Determining whether monetary policy affects financial variables domestically—especially compared to the effects of macroprudential policies— and across borders, is crucial in this context. This paper looks into these issues using U.S. exogenous monetary policy shocks and macroprudential policy measures. Estimates indicate that monetary policy shocks have significant and persistent effects on financial conditions and can attenuate long-term financial instability. In contrast, the impact of macroprudential policy measures is generally more immediate but shorter-lasting. Also, while an exogenous increase in U.S. monetary policy rates tends to reduce credit and house prices in other countries—with the effects varying with country-specific characteristics—an increase driven by improved U.S. economic conditions tends to have the opposite effect. Finally, we do not find evidence of cross-border spillover effects associated with U.S. macroprudential policies.

Subject: Bank credit, Credit, Financial sector policy and analysis, Financial sector stability, Macroprudential policy, Macroprudential policy instruments, Money

Keywords: A. monetary policy, Bank credit, Credit, Financial sector stability, Financial stability, Global, Macroprudential policy, Macroprudential policy instruments, Monetary policy, Monetary policy action, Monetary policy policy change, Monetary policy shock, Monetary policy tightening, Rate change, Shocks affect, Spillovers, WP

Publication Details

Pages:

29
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2015/288
Stock No:

WPIEA2015288
ISBN:

9781513519159
ISSN:

1018-5941

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