IBRN Initiative on Interactions of Monetary and Prudential Policies


This paper surveys a recent IBRN initiative that studied the interactions of monetary and macroprudential policies. The general research questions is: To what extent does macroprudential policy reshape the transmission of monetary policy? The concrete context differs across studies. There are three main findings. First, domestic prudential policy in recipient economies can partially offset inward transmission from systemic economies to domestic lending, with the size of the effect being heterogeneous across banks in source countries. Second, the stance of prudential policy in the source economy also matters and can affect the intensity of outward monetary transmission. Finally, there is much heterogeneity in the strength of effect across different prudential instruments.