Ricerc@Sapienza

This project investigates the topics related to financial instability and the possibility of controlling the financial cycle by means of a new policy paradigm which includes both macroprudential policy (MPP) and monetary policy (MP). The main research questions are the following three: how does MPP work when feedback effects and cross-section spillovers mechanisms are taken into account? Does MP perform better in the same scenario? How may MP and MPP be coordinated? The final dissertation will address these questions from both an empirical and a theoretical viewpoint. In the first two papers we investigate empirically the effects of MP and MPP interventions in the Euro Area. Once we have pointed out the stylized facts about credit booms in the Euro Area we employ a Mixed-Cross-Section Global VAR model (MCS-GVAR) and a logistic model that estimates the probability of being in a state of potential financial instability. In the final part of the project we aim at evaluating the results obtained through the empirical analysis by mean of a theoretical model that should serve to assess the optimal MP-MPP intervention and how they may coordinate.