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Macroprudential regulation, credit spreads and the role of monetary policy

Research output: Working paperDiscussion paper

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Macroprudential regulation, credit spreads and the role of monetary policy. / Tayler, William John; Zilberman, Roy.

Bank of England, 2016. (Bank of England Staff Working Papers; No. 599).

Research output: Working paperDiscussion paper

Harvard

Tayler, WJ & Zilberman, R 2016 'Macroprudential regulation, credit spreads and the role of monetary policy' Bank of England Staff Working Papers, no. 599, Bank of England.

APA

Tayler, W. J., & Zilberman, R. (2016). Macroprudential regulation, credit spreads and the role of monetary policy. (Bank of England Staff Working Papers; No. 599). Bank of England.

Vancouver

Tayler WJ, Zilberman R. Macroprudential regulation, credit spreads and the role of monetary policy. Bank of England. 2016 Apr 29. (Bank of England Staff Working Papers; 599).

Author

Bibtex

@techreport{70fa316c78fa40ea82aff81bb5a490e4,
title = "Macroprudential regulation, credit spreads and the role of monetary policy",
abstract = "We study the macroprudential roles of bank capital regulation and monetary policy in a borrowing cost channel model with endogenous financial frictions, driven by credit risk, bank losses and bank capital costs. These frictions induce financial accelerator mechanisms and motivate the examination of a macroprudential toolkit. Following credit shocks, countercyclical regulation is more effective than monetary policy in promoting price, financial and macroeconomic stability. For supply shocks, combining macroprudential regulation with a stronger anti-inflationary policy stance is optimal. The findings emphasize the importance of the Basel III accords in alleviating the output-inflation trade-off faced by central banks, and cast doubt on the desirability of conventional (and unconventional) Taylor rules during periods of financial distress.",
keywords = "Basel III - Macroprudential Policy , Bank Capital, Monetary Policy, Borrowing Cost Channel, Welfare",
author = "Tayler, {William John} and Roy Zilberman",
year = "2016",
month = apr
day = "29",
language = "English",
series = "Bank of England Staff Working Papers",
publisher = "Bank of England",
number = "599",
type = "WorkingPaper",
institution = "Bank of England",

}

RIS

TY - UNPB

T1 - Macroprudential regulation, credit spreads and the role of monetary policy

AU - Tayler, William John

AU - Zilberman, Roy

PY - 2016/4/29

Y1 - 2016/4/29

N2 - We study the macroprudential roles of bank capital regulation and monetary policy in a borrowing cost channel model with endogenous financial frictions, driven by credit risk, bank losses and bank capital costs. These frictions induce financial accelerator mechanisms and motivate the examination of a macroprudential toolkit. Following credit shocks, countercyclical regulation is more effective than monetary policy in promoting price, financial and macroeconomic stability. For supply shocks, combining macroprudential regulation with a stronger anti-inflationary policy stance is optimal. The findings emphasize the importance of the Basel III accords in alleviating the output-inflation trade-off faced by central banks, and cast doubt on the desirability of conventional (and unconventional) Taylor rules during periods of financial distress.

AB - We study the macroprudential roles of bank capital regulation and monetary policy in a borrowing cost channel model with endogenous financial frictions, driven by credit risk, bank losses and bank capital costs. These frictions induce financial accelerator mechanisms and motivate the examination of a macroprudential toolkit. Following credit shocks, countercyclical regulation is more effective than monetary policy in promoting price, financial and macroeconomic stability. For supply shocks, combining macroprudential regulation with a stronger anti-inflationary policy stance is optimal. The findings emphasize the importance of the Basel III accords in alleviating the output-inflation trade-off faced by central banks, and cast doubt on the desirability of conventional (and unconventional) Taylor rules during periods of financial distress.

KW - Basel III - Macroprudential Policy

KW - Bank Capital

KW - Monetary Policy

KW - Borrowing Cost Channel

KW - Welfare

M3 - Discussion paper

T3 - Bank of England Staff Working Papers

BT - Macroprudential regulation, credit spreads and the role of monetary policy

PB - Bank of England

ER -