Optimal Policy for Macro-Financial Stability
Copyright policy )Optimal Policy for Macro-Financial Stability
There is a new and now large literature analyzing government policies for financial stability based on models with endogenous borrowing constraints. These normative analyses build upon the concept of constrained efficient allocation where the social planner is constrained by the same borrowing limit that agents face. In this paper, we show that there exists at least one set of tools implementing the constrained efficient allocation that can also be used by a Ramsey planner to replicate an unconstrained allocation, achieving higher welfare. Constrained efficiency may lead to inaccurate characterizations of welfare maximizing policies relative to Ramsey optimal policy. (JEL E32, E44, E61, G01, H21)
- Johns Hopkins University United States
- University of Missouri United States
- National Bureau of Economic Research United States
- Inter-American Development Bank United States
- JOHNS HOPKINS UNIVERSITY United States
Dynamisches Gleichgewicht, social planner, H23, constrained efficiency, pecuniary externalities, Konjunkturpolitik, macroprudential policies and capital controls, Bailouts, capital controls, exchange rate policy, financial frictions, financial crises, macro-financial stability, macro-prudential policies, Monetary policy ; Financial stability, E52, financial crises, Ramsey optimal policy, Financial Sector, Bailouts, Capital Controls, Exchange Rate Policy, Financial Frictions, FinancialCrises, Macro-Financial Stability, Macro-Prudential Policies, ddc:330, Bankenaufsicht, Bailouts; Capital Controls; Exchange Rate Policy; Financial Crises; Financial Frictions; Macro-Financial Stability; Macro-Prudential Policies, F37, F38, Finanzkrise, E61, Wirtschaftspolitik, F44, Schuldenübernahme, F41, Theorie, jel: jel:F41, jel: jel:E52, jel: jel:F37
Dynamisches Gleichgewicht, social planner, H23, constrained efficiency, pecuniary externalities, Konjunkturpolitik, macroprudential policies and capital controls, Bailouts, capital controls, exchange rate policy, financial frictions, financial crises, macro-financial stability, macro-prudential policies, Monetary policy ; Financial stability, E52, financial crises, Ramsey optimal policy, Financial Sector, Bailouts, Capital Controls, Exchange Rate Policy, Financial Frictions, FinancialCrises, Macro-Financial Stability, Macro-Prudential Policies, ddc:330, Bankenaufsicht, Bailouts; Capital Controls; Exchange Rate Policy; Financial Crises; Financial Frictions; Macro-Financial Stability; Macro-Prudential Policies, F37, F38, Finanzkrise, E61, Wirtschaftspolitik, F44, Schuldenübernahme, F41, Theorie, jel: jel:F41, jel: jel:E52, jel: jel:F37
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