Description

The Global Financial Crisis has reopened discussions on the role of the monetary policy in
 preserving financial stability. Determining whether monetary policy affects financial
 variables domestically—especially compared to the effects of macroprudential policies—
 and across borders, is crucial in this context. This paper looks into these issues using U.S.
 exogenous monetary policy shocks and macroprudential policy measures. Estimates indicate
 that monetary policy shocks have significant and persistent effects on financial conditions
 and can attenuate long-term financial instability. In contrast, the impact of macroprudential
 policy measures is generally more immediate but shorter-lasting. Also, while an exogenous
 increase in U.S. monetary policy rates tends to reduce credit and house prices in other
 countries—with the effects varying with country-specific characteristics—an increase driven
 by improved U.S. economic conditions tends to have the opposite effect. Finally, we do not
 find evidence of cross-border spillover effects associated with U.S. macroprudential policies.

More publications in this series: Working Papers

More publications by: Aleksandra Zdzienicka ; Sally Chen ; Federico Diaz Kalan ; Stefan Laseen ; Katsiaryna Svirydzenka