Monetary Policy and Macroprudential Regulation with Financial Frictions

This book comprehensively studies the critical role that financial frictions, and credit market imperfections in particular, play in macroeconomic models, and how they affect the effectiveness of monetary and macroprudential policies. To that effect, the book offers numerous insights into the specification and use of these models, ranging from static to dynamic stochastic general equilibrium (DSGE) and endogenous growth models. Through a blend of theoretical insights and practical applications, readers will also learn to analyze how monetary and macroprudential policies interact, and how they can be used jointly to promote macro-financial stability and contribute to social welfare.

Updated with the latest developments, this edition provides fresh perspectives on a range of topics, including international macroprudential policy coordination. Addressing a broad audience of researchers, professional macroeconomists, graduate and advanced undergraduate students, this book equips readers with the technical foundations and policy insights necessary for a deep understanding of the role of monetary policy and financial regulation.

Chapter 1. Financial Systems, Financial Frictions, and Macroeconomic Models. - Chapter 2. A Simple Closed-Economy Model with Financial Frictions. - Chapter 3. A Simple Open-Economy Model with Financial Frictions. - Chapter 4. A Core DSGE Model with Financial Frictions. - Chapter 5. Countercyclical Policy Rules and Optimal Policy. - Chapter 6. Capital Requirements and Monetary Policy. - Chapter 7. An Open-Economy DSGE Model with Financial Frictions. - Chapter 8. Policy Responses to External Shocks. - Chapter 9. International Macroprudential Policy Coordination. - Chapter 10. Macroprudential Regulation and Economic Growth. - Chapter 11. Some Research Perspectives.