TY - BOOK ID - 84655824 TI - Systemic Risk : A New Trade-off for Monetary Policy? AU - Laseen, Stefan. AU - Pescatori, Andrea. AU - Turunen, Jarkko. PY - 2015 SN - 151356711X 1513571214 PB - Washington, D.C. : International Monetary Fund, DB - UniCat KW - International finance. KW - International Monetary Fund. KW - Monetary policy -- Econometric models. KW - Money KW - Finance KW - Business & Economics KW - Inflation KW - Investments: Stocks KW - Macroeconomics KW - Industries: Financial Services KW - Monetary Policy KW - Central Banks and Their Policies KW - Financial Markets and the Macroeconomy KW - Policy Objectives KW - Policy Designs and Consistency KW - Policy Coordination KW - Financial Institutions and Services: General KW - Price Level KW - Deflation KW - Pension Funds KW - Non-bank Financial Institutions KW - Financial Instruments KW - Institutional Investors KW - Investment & securities KW - Financial sector KW - Asset prices KW - Stocks KW - Nonbank financial institutions KW - Economic sectors KW - Prices KW - Financial institutions KW - Financial services industry KW - United States UR - https://www.unicat.be/uniCat?func=search&query=sysid:84655824 AB - We introduce time-varying systemic risk in an otherwise standard New-Keynesian model to study whether a simple leaning-against-the-wind policy can reduce systemic risk and improve welfare. We find that an unexpected increase in policy rates reduces output, inflation, and asset prices without fundamentally mitigating financial risks. We also find that while a systematic monetary policy reaction can improve welfare, it is too simplistic: (1) it is highly sensitive to parameters of the model and (2) is detrimental in the presence of falling asset prices. Macroprudential policy, similar to a countercyclical capital requirement, is more robust and leads to higher welfare gains. ER -