Effects of Monetary and Macroprudential Policies on Financial Conditions: Evidence from the United States

30 Pages Posted: 17 Feb 2016

See all articles by Aleksandra Zdzienicka

Aleksandra Zdzienicka

International Monetary Fund (IMF)

Sally Chen

International Monetary Fund (IMF)

Federico Kalan

International Monetary Fund (IMF)

Stefan Laseen

Sveriges Riksbank - Monetary Policy Department

Katsiaryna Svirydzenka

International Monetary Fund (IMF)

Date Written: December 2015

Abstract

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.

Keywords: spillovers, international monetary fund, exchange rate, transmission mechanism, Monetary Policy (Targets, Instruments, and Effects), spillovers.,

JEL Classification: E32, E52, E58, G01

Suggested Citation

Zdzienicka, Aleksandra and Chen, Sally and DK, Fede and Laseen, Stefan and Svirydzenka, Katsiaryna, Effects of Monetary and Macroprudential Policies on Financial Conditions: Evidence from the United States (December 2015). IMF Working Paper No. 15/288, Available at SSRN: https://ssrn.com/abstract=2733588

Aleksandra Zdzienicka (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Sally Chen

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Fede DK

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Stefan Laseen

Sveriges Riksbank - Monetary Policy Department ( email )

S-103 37 Stockholm
Sweden

Katsiaryna Svirydzenka

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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