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Monetary and Macroprudential Policy Rules in a Model with House Price Booms
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Author/Editor: |
Kannan, Prakash | Rabanal, Pau | Scott, Alasdair |
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November 1, 2009 |
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Electronic Access: |
Free Full Text (PDF file size is 950KB)
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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.
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Summary: We argue that a stronger emphasis on macrofinancial risk could provide stabilization benefits. Simulations results suggest that strong monetary reactions to accelerator mechanisms that push up credit growth and asset prices could help macroeconomic stability. In addition, using a macroprudential instrument designed specifically to dampen credit market cycles would also be useful. But invariant and rigid policy responses raise the risk of policy errors that could lower, not raise, macroeconomic stability. Hence, discretion would be required.
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Order a print copy
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Series: |
Working Paper No. 09/251 |
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Subject(s): |
Asset prices | Capital markets | Central banks | Credit controls | Credit demand | Credit risk | Economic models | External shocks | Household credit | Housing prices | Monetary policy | Price increases |
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Author's keyword(s): |
house prices
| monetary policy
| macroprudential
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Published: |
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November 1, 2009 |
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Format: |
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Paper |
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Stock No: |
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WPIEA2009251 |
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Pages: |
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36 |
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Price: |
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US$18.00 (Academic Rate: US$18.00 )
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