## Synergies Between Monetary and Macroprudential Policies in Thailand

_IMF Working Papers, June 5, 2020_

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## Bibliographic details
- Authors: Ichiro Fukunaga, Jie Yu
- Published: June 5, 2020
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781513537023.001

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### Summary and Model
- Authors: Ichiro Fukunaga, Jie Yu
- Date: June 5, 2020
- Methodology: A dynamic stochastic general equilibrium (DSGE) model tailored to the Thai economy.
- Shock focus: Shocks that directly impact the financial cycle.
- Principal model comparison: alternative monetary policy rules (including a lean-against-the-wind rule) and macroprudential policy rules (including counter-cyclical, well targeted instruments).

### Key Findings
- The model shows that a monetary policy focused on its traditional inflation and output objectives accompanied by a well targeted counter-cyclical macroprudential policy yields better macroeconomic outcomes than a lean-against-the-wind monetary policy rule under a wide range of assumptions.
- Emphasis on interactions between monetary policy and macroprudential instruments when financial-cycle shocks are present.

### Policy Implications and Recommendations
- Prioritize a monetary policy rule targeting inflation and output stabilization as the primary tool for macroeconomic management.
- Deploy well targeted counter-cyclical macroprudential policy to address financial-cycle risks and complement monetary policy.
- Avoid relying primarily on a lean-against-the-wind monetary policy rule for stabilizing financial-cycle shocks, given the model’s indication of weaker macroeconomic outcomes under that approach.

### Subjects and Keywords
- Subjects: Financial sector policy and analysis; Financial sector stability; Housing; Inflation; Macroprudential policy; Macroprudential policy instruments; National accounts; Prices.
- Keywords: Dynamic stochastic general equilibrium model; Financial sector stability; household LTV cap; Housing; housing loan; Inflation; inflation gap; inflation stability; Lean-against-the-wind monetary policy rule; loan; LTV rule; Macroprudential policies; Macroprudential policy; Macroprudential policy instruments; monetary policy; monetary policy transmission; Taylor; Thailand; world interest rate; world interest rate shock; WP; x inflation gap.

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_Source: https://www.imf.org/en/publications/wp/issues/2020/06/05/synergies-between-monetary-and-macroprudential-policies-in-thailand-49266_