Informality, Frictions, and Macroprudential Policy

Author/Editor:

Moez Ben Hassine ; Nooman Rebei

Publication Date:

November 27, 2019

Electronic Access:

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Summary:

We analyze the effects of macroprudential policies through the lens of an estimated dynamic stochastic general equilibrium (DSGE) model tailored to developing markets. In particular, we explicitly introduce informality in the labor and goods markets within a small open economy embedding financial frictions, nominal and real rigidities, labor search and matching, and an explicit banking sector. We use the estimated version of the model to run welfare analysis under optimized monetary and macroprudential rules. Results show that although informality reduces the efficiency of macroprudential policies following a convex fashion, combining the latter with an inflation targeting objective could be beneficial.

Series:

Working Paper No. 19/255

English

Publication Date:

November 27, 2019

ISBN/ISSN:

9781498320856/1018-5941

Stock No:

WPIEA2019255

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

37

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