Coordination Effects and Optimal Policy Choices of Macroprudential Policy and Monetary Policy

Table 1

Welfare improvement of the optimal combination of monetary policy rules and LTV macroprudential rules.

	Optimal parameters in LTV	Patient households	Impatient households	Bankers	Total social welfare
Taylor 1 + LTV macroprudential rules
LTV only depends on output	= 0.16	−0.2241	0.6480	−0.0910	0.0242
LTV only depends on housing prices	= 0.60	−0.6274	0.8442	3.9934	0.2955
LTV only depends on output and housing prices	= 0.60;  = 0	−0.6274	0.8442	3.9934	0.2955
Taylor 2 + LTV macroprudential rules
LTV only depends on output	= 0	0.0000	0.0000	0.0000	0.0000
LTV only depends on housing prices	= 0.60	−0.4089	0.6953	2.8011	0.2128
LTV only depends on output and housing prices	= 0.60;  = 0	−0.4089	0.6953	2.8011	0.2128
Taylor 3 + LTV macroprudential rules
LTV only depends on output	= 0	0.0000	0.0000	0.0000	0.0000
LTV only depends on housing prices	= 0.53	−0.2231	0.6441	1.9097	0.1541
LTV only depends on output and housing prices	= 0.53;  = 0	−0.2231	0.6441	1.9097	0.1541

Note. When the LTV only depends on the factor of output, the solution is carried out in the [0, 1] interval with step 0.01 for parameter . When the LTV depends on the factor of housing prices, the solution is carried out in the [0, 1] interval with step 0.01 for parameter . When the LTV depends on the factors of both output and housing prices, takes 0.01 as the step in the [0, 1] interval, takes 0.01 as the step in the [0, 1] interval, and all the combinations of the two parameters are used to solve the problem. Combined with the improvement of the total social welfare, the optimal welfare is determined. In order to make the meaning of the sign intuitive, the welfare changes were multiplied by minus 10⁴. When the welfare change value is positive after conversion, it means welfare improvement; in addition, when it is negative, it means welfare loss, the same below.