Macroprudential Regulation Versus Mopping Up After the Crash ∗

  title={Macroprudential Regulation Versus Mopping Up After the Crash ∗},
  author={Olivier Jeanne and Johns},
  • Olivier Jeanne, Johns
  • Published 2012
We study the interplay of optimal ex-ante (macroprudential) and ex-post (monetary or fiscal stimulus) measures to respond to systemic financial crises in a tractable model of fire sales. We find that it is generally optimal to use both, rejecting the Greenspan doctrine to only intervene ex post. Optimal macroprudential policy resolves the time consistency problems associated with stimulus measures. However, if macroprudential policy is suboptimal, for example because of circumvention, only… CONTINUE READING
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