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Macroprudential regulation in the post-crisis era: has the pendulum swung too far?

Lyu, Juyi, Le, Vo ORCID:, Meenagh, David ORCID: and Minford, Anthony ORCID: 2021. Macroprudential regulation in the post-crisis era: has the pendulum swung too far? Journal of International Financial Markets, Institutions and Money 74 , 101381. 10.1016/j.intfin.2021.101381

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This paper presents an institutional model to investigate the cooperation between a government and a central bank. The former selects the monetary policy and then delegates the organization of macroprudential policy to the latter. Their policy stances are the result of sequential constrained utility maximization. Using indirect inference, we find a set of coefficients that can capture the UK policy stances for 1993-2016. This suggests post-crisis regulation has been overly intrusive. Finally, we show that this regulatory dilemma can be avoided by committing to a highly stabilizing monetary regime that uses QE extensively.

Item Type: Article
Date Type: Publication
Status: Published
Schools: Business (Including Economics)
Advanced Research Computing @ Cardiff (ARCCA)
Publisher: Elsevier
ISSN: 1042-4431
Date of First Compliant Deposit: 6 July 2021
Date of Acceptance: 2 July 2021
Last Modified: 10 Nov 2022 19:30

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