Optimal macroprudential policy and rational bubbles

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• dc.contributor.author Freixas, Xavier
• dc.contributor.author Perez Reyna, David
• dc.date.accessioned 2021-04-12T07:54:28Z
• dc.date.available 2021-04-12T07:54:28Z
• dc.date.issued 2021
• dc.description.abstract We provide a microfounded framework for the welfare analysis of macroprudential policy within a model of rational bubbles. For this, we posit an overlapping generation model where productivity and credit supply are subject to random shocks. We find that when real interest rates are lower than the rate of growth, credit financed bubbles may be welfare improving because of their role as a buffer in channeling excessive credit supply and inefficient investment at the firms’ level, but their sudden price decrease may cause a systemic crisis. Therefore, a well designed macroprudential policy plays a key role in improving efficiency while preserving financial stability. Our theoretical framework allows us to compare the efficiency of alternative macroprudential policies. Contrarily to conventional wisdom, we show that macroprudential policy (i) may be efficient even in the absence of systemic risk, (ii) has to be contingent on productivity shocks and (iii) must be contingent upon the level of real interest rates.en
• dc.description.sponsorship Xavier Freixas has benefited from the support of Ministerio de Economia y Competividad ECO2014-55488-P, Generalitat de Catalunya and Barcelona GSE.
• dc.format.mimetype application/pdf
• dc.identifier.citation Freixas X, Perez-Reyna D. Optimal macroprudential policy and rational bubbles. Journal of Financial Intermediation. 2021 Apr;46:100908. DOI: 10.1016/j.jfi.2021.100908
• dc.identifier.doi http://dx.doi.org/10.1016/j.jfi.2021.100908
• dc.identifier.issn 1042-9573
• dc.identifier.uri http://hdl.handle.net/10230/47090
• dc.language.iso eng
• dc.publisher Elsevier
• dc.relation.ispartof Journal of Financial Intermediation. 2021 Apr;46:100908
• dc.relation.projectID info:eu-repo/grantAgreement/ES/1PE/ECO2014-55488-P
• dc.rights © Elsevier https://doi.org/10.1016/j.jfi.2021.100908
• dc.rights.accessRights info:eu-repo/semantics/openAccess
• dc.subject.keyword Banken
• dc.subject.keyword Bubbleen
• dc.subject.keyword Macroprudential regulationen
• dc.subject.keyword E44en
• dc.subject.keyword E60en
• dc.subject.keyword G18en
• dc.subject.keyword G21en
• dc.subject.keyword G28en
• dc.title Optimal macroprudential policy and rational bubblesen
• dc.type info:eu-repo/semantics/article
• dc.type.version info:eu-repo/semantics/acceptedVersion