Work

Cyclical macroeconomic policy, financial regulation and economic growth

Year: 2013

Type: preprint

Abstract: This paper investigates the effect of cyclical macroeconomic policy and financial sector characteristics on growth. Using cross-country, cross-industry OECD data, it yields two main findings. First, countercyclical fiscal and monetary policies foster growth disproportionately in more credit/liquidity-constrained industries. Second, while higher bank capital ratios may contribute to reducing the benefit of a countercyclical monetary policy, countercyclical credit enhances growth disproportionately in more credit/liquidity-constrained industries and this complements the growth effects of countercyclical monetary policy. Raising regulatory requirements for bank capital can therefore help achieve financial stability and preserve economic growth if complemented with more countercyclical macroeconomic and regulatory policy.

Source: SSRN Electronic Journal

Authors: Philippe Aghion, Enisse Kharroubi

Institutions: National Bureau of Economic Research, Collège de France, Centre for Economic Policy Research, London School of Economics and Political Science, Bank for International Settlements

Language: English

Topic: Monetary Policy and Economic Impact

Subfield: General Economics, Econometrics and Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDG: Decent work and economic growth

Open Access status: green

OpenAlex ID: W1519748778

Cites: 14

Cited by: 18

Related to: 10