BADARAU, Cristina; CARIAS, Marcos; FIGUET, Jean-Marc

doi:10.1016/j.qref.2020.01.005

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BADARAU, Cristina
Laboratoire d'analyse et de recherche en économie et finance internationales [Larefi]

CARIAS, Marcos
Laboratoire d'analyse et de recherche en économie et finance internationales [Larefi]

FIGUET, Jean-Marc

Laboratoire d'analyse et de recherche en économie et finance internationales [Larefi]

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Quarterly Review of Economics and Finance. 2020, vol. 77, p. 1-13

Résumé en anglais

Financial flows between heterogeneous member states were crucial drivers of the imbalances that culminated in the Euro crisis. Macroprudential instruments, by affecting the behavior of international banks, can have secondary effects on the financial cycles of other member states. However, countercyclical tools like the Basel III capital buffer are mostly set by independent authorities with national stabilization mandates. Should regulators coordinate macroprudential policy, and if so how? Using a small two-country NK model with financial frictions, we show that macroprudential responses in core economies can have destabilizing spillover effects on a financially dependent periphery through interbank lending. We subsequently evaluate a policy rule in which the core regulator internalizes these spillovers and compare it to prevailing national stabilization rule. While national rules deliver a good performance in general, under certain conditions internalization becomes preferable.< Réduire

Mots clés en anglais

Macroprudential

Capital regulation

Basel III

Monetary union

New-Keynesian model

Cross-border spillovers

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Cross-border spillovers of macroprudential policy in the Euro area

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