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Macroprudential Interventions in Liquidity Traps

Research output: Working paper

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Macroprudential Interventions in Liquidity Traps. / Tayler, William John; Zilberman, Roy.

Lancaster : Lancaster University, Department of Economics, 2019. (Economics Working Papers Series).

Research output: Working paper

Harvard

Tayler, WJ & Zilberman, R 2019 'Macroprudential Interventions in Liquidity Traps' Economics Working Papers Series, Lancaster University, Department of Economics, Lancaster.

APA

Tayler, W. J., & Zilberman, R. (2019). Macroprudential Interventions in Liquidity Traps. (Economics Working Papers Series). Lancaster: Lancaster University, Department of Economics.

Vancouver

Tayler WJ, Zilberman R. Macroprudential Interventions in Liquidity Traps. Lancaster: Lancaster University, Department of Economics. 2019 Feb. (Economics Working Papers Series).

Author

Tayler, William John ; Zilberman, Roy. / Macroprudential Interventions in Liquidity Traps. Lancaster : Lancaster University, Department of Economics, 2019. (Economics Working Papers Series).

Bibtex

@techreport{756262bf06be4358ae44f84c9b845bff,
title = "Macroprudential Interventions in Liquidity Traps",
abstract = "We characterize the joint optimal implementation of macroprudential and monetary policies in a New Keynesian model where endogenous supply-side financial frictions generate inflationary credit spreads. State-contingent macroprudential interventions help to stabilize volatile spreads, and substantially alter the transmission of optimal monetary policy under both discretion and commitment. In 'normal times', macroprudential policies replicate the first-best allocation. In liquidity traps, financial interventions remove the zero lower bound restriction on the nominal policy rate, thus minimizing output costs following both deflationary (inflationary) demand (financial) shocks. Discretionary and commitment policies with macroprudential taxes deliver equivalent welfare gains.",
keywords = "financial taxation, monetary policy, optimal policy, credit cost channel, credit spreads, zero lower bound",
author = "Tayler, {William John} and Roy Zilberman",
year = "2019",
month = "2",
language = "English",
series = "Economics Working Papers Series",
publisher = "Lancaster University, Department of Economics",
type = "WorkingPaper",
institution = "Lancaster University, Department of Economics",

}

RIS

TY - UNPB

T1 - Macroprudential Interventions in Liquidity Traps

AU - Tayler, William John

AU - Zilberman, Roy

PY - 2019/2

Y1 - 2019/2

N2 - We characterize the joint optimal implementation of macroprudential and monetary policies in a New Keynesian model where endogenous supply-side financial frictions generate inflationary credit spreads. State-contingent macroprudential interventions help to stabilize volatile spreads, and substantially alter the transmission of optimal monetary policy under both discretion and commitment. In 'normal times', macroprudential policies replicate the first-best allocation. In liquidity traps, financial interventions remove the zero lower bound restriction on the nominal policy rate, thus minimizing output costs following both deflationary (inflationary) demand (financial) shocks. Discretionary and commitment policies with macroprudential taxes deliver equivalent welfare gains.

AB - We characterize the joint optimal implementation of macroprudential and monetary policies in a New Keynesian model where endogenous supply-side financial frictions generate inflationary credit spreads. State-contingent macroprudential interventions help to stabilize volatile spreads, and substantially alter the transmission of optimal monetary policy under both discretion and commitment. In 'normal times', macroprudential policies replicate the first-best allocation. In liquidity traps, financial interventions remove the zero lower bound restriction on the nominal policy rate, thus minimizing output costs following both deflationary (inflationary) demand (financial) shocks. Discretionary and commitment policies with macroprudential taxes deliver equivalent welfare gains.

KW - financial taxation

KW - monetary policy

KW - optimal policy

KW - credit cost channel

KW - credit spreads

KW - zero lower bound

M3 - Working paper

T3 - Economics Working Papers Series

BT - Macroprudential Interventions in Liquidity Traps

PB - Lancaster University, Department of Economics

CY - Lancaster

ER -