Kaelo Ntwaepelo – “Assessing the Effects of Macroprudential Policy on the Core Objectives of Monetary Policy: Evidence From Emerging Economies” – PhD Seminar

Abstract:

Macroprudential policy instruments have several benefits for central banks to use in managing the financial cycle. Although there is research that examines their effects on output and inflation in emerging economies, the quantified effects of the change in macroprudential policy actions remain unknown. This study therefore contributes to the existing literature by examining the effect of a one percentage point change in the loan-to-value (LTV) ratio on output and inflation, in emerging economies. Using a novel macroprudential dataset by the International Monetary Fund (IMF), the research employs the local projection method (LPM) to estimate impulse responses to a change in LTV ratios, for the period 1990Q1 to 2016Q4. The results are expected to indicate that macroprudential policy achieves the desired targets at a relatively small cost and therefore serve as a complementary policy tool that does not interfere with the core objectives of monetary in a major way.