Financial Frictions and Macroprudential Policy
by Michal Brzoza-Brzezina
Narodowy Bank Polski and Warsaw School of Economics
Incorporating financial intermediaries, with their ability to
generate shocks and frictions, into macroeconomic models has
recently gained substantial attention of the profession. In this
commentary I ask whether the models we generated are ripe
to provide valuable, quantitative advice to policymakers, especially
those interested in implementing and conducting macroprudential
policy. I concentrate on three features of standard
DSGE models that, in my view, still make them hard to digest
for policymakers: goals of macroprudential policy, assumed
terms of lending, and spillovers.
JEL Codes: E44, E51, E58.
Full article (PDF, 13 pages, 247 kb)