Macroprudential regulation in the post-crisis era: has the pendulum swung too far?
Macroprudential regulation in the post-crisis era: has the pendulum swung too far?
This paper presents an institutional model to investigate the cooperation between a government and a central bank. The former selects the monetary policy and then delegates the organization of macroprudential policy to the latter. Their policy stances are the result of sequential constrained utility maximization. Using indirect inference, we find a set of coefficients that can capture the UK policy stances for 1993–2016. This suggests post-crisis regulation has been overly intrusive. Finally, we show that this regulatory dilemma can be avoided by committing to a highly stabilizing monetary regime that uses QE extensively.
Bank regulation, Financial stability, Monetary policy, Public choice theory
Lyu, Juyi
43ed7d95-1ed4-41a7-b58f-48714d1366b0
Le, Vo Phuong Mai
338d94e3-38f3-4716-93b6-534294506c9f
Meenagh, David
f37f5bb6-cd01-4c48-b077-2f4a4488b61f
Minford, Patrick
3506ad67-a24f-4746-9b50-61c0e26bd9a9
September 2021
Lyu, Juyi
43ed7d95-1ed4-41a7-b58f-48714d1366b0
Le, Vo Phuong Mai
338d94e3-38f3-4716-93b6-534294506c9f
Meenagh, David
f37f5bb6-cd01-4c48-b077-2f4a4488b61f
Minford, Patrick
3506ad67-a24f-4746-9b50-61c0e26bd9a9
Lyu, Juyi, Le, Vo Phuong Mai, Meenagh, David and Minford, Patrick
(2021)
Macroprudential regulation in the post-crisis era: has the pendulum swung too far?
Journal of International Financial Markets, Institutions and Money, 74, [101381].
(doi:10.1016/j.intfin.2021.101381).
Abstract
This paper presents an institutional model to investigate the cooperation between a government and a central bank. The former selects the monetary policy and then delegates the organization of macroprudential policy to the latter. Their policy stances are the result of sequential constrained utility maximization. Using indirect inference, we find a set of coefficients that can capture the UK policy stances for 1993–2016. This suggests post-crisis regulation has been overly intrusive. Finally, we show that this regulatory dilemma can be avoided by committing to a highly stabilizing monetary regime that uses QE extensively.
Text
Accepted version
- Accepted Manuscript
More information
Accepted/In Press date: 2 July 2021
e-pub ahead of print date: 9 July 2021
Published date: September 2021
Keywords:
Bank regulation, Financial stability, Monetary policy, Public choice theory
Identifiers
Local EPrints ID: 451652
URI: http://eprints.soton.ac.uk/id/eprint/451652
ISSN: 1042-4431
PURE UUID: 6d919a59-3c9c-4e84-9809-634f172f2d03
Catalogue record
Date deposited: 18 Oct 2021 16:31
Last modified: 17 Mar 2024 06:50
Export record
Altmetrics
Contributors
Author:
Vo Phuong Mai Le
Author:
David Meenagh
Author:
Patrick Minford
Download statistics
Downloads from ePrints over the past year. Other digital versions may also be available to download e.g. from the publisher's website.
View more statistics
