Informality, Frictions, and Macroprudential Policy
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Summary:
We analyze the effects of macroprudential policies through the lens of an estimated dynamic stochastic general equilibrium (DSGE) model tailored to developing markets. In particular, we explicitly introduce informality in the labor and goods markets within a small open economy embedding financial frictions, nominal and real rigidities, labor search and matching, and an explicit banking sector. We use the estimated version of the model to run welfare analysis under optimized monetary and macroprudential rules. Results show that although informality reduces the efficiency of macroprudential policies following a convex fashion, combining the latter with an inflation targeting objective could be beneficial.
Series:
Working Paper No. 2019/255
Subject:
Banking Consumption Financial sector policy and analysis Housing Labor Macroprudential policy National accounts Self-employment
English
Publication Date:
November 27, 2019
ISBN/ISSN:
9781498320856/1018-5941
Stock No:
WPIEA2019255
Pages:
37
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