Coordination between monetary and macroprudential policies. What do the DSGE models say?

Summary We conduct a meta-analysis of twenty-three DSGE models that have all the characteristics that allow us to observe how monetary policy and macroprudential policy (MPP) are combined. These models have in common that they incorporate macroprudential instruments to limit financial fluctuations and that they represent monetary policy by means of a Taylor rule that can make the interest rate respond to the inflation gap, the output gap and a financial gap. Taking the value of the financial gap response coefficient in the Taylor rule as the hinge of the policy mix between monetary policy and MPP, we make it our dependent variable. The relationship we test depends mainly on the type of macroprudential instruments chosen, the relative importance given to inflation and the output gap in the Taylor rule, and the way in which the response coefficients in the Taylor rule are obtained (by optimization/estimation or by calibration). Our results suggest that the type of macroprudential instruments chosen has a significant influence on the degree of linkage between monetary policy and the MPC, and that the more importance the monetary policy rule gives to inflation, the less strong the linkage.