THE POLICY MIX BETWEEN MONETARY AND MACRO PRUDENTIAL POLICIES. WHAT DSGE MODELS TELL US?

We perform a meta-analysis of 23 DSGE models that all specify the policy mix between monetary policy and macroprudential policy (MaP). These models have in common to incorporate macroprudential policies, particularly in the form of rules used to limit financial fluctuations, and represent monetary policy through an augmented Taylor lute (ATR) which adjust the interest rate to the inflation gap, the output gap and a financial gap. We consider the response to the financial gap in the ATR as our dependent variable considering that its value is representative of the policy mix between monetary policy and MaP. In the relationship that we test, our explained variable is mainly linked to the type of macroprudential instruments (if they constrain borrowers or lenders), to the magnitude in the Taylor rule of the coefficients on inflation and the output gap, and to the method for obtaining parameters (by optimization/estimation or calibration). Our results suggest that the type of macroprudential instruments significantly influences the integration degree of the mix between monetary policy and MaP. In addition, the more the monetary policy attaches importance to inflation, the less this integration is strong.