Brzoza-Brzezina, Michal
[Verfasser:in]
;
Kolasa, Marcin
[Sonstige Person, Familie und Körperschaft];
Makarski, Krzysztof
[Sonstige Person, Familie und Körperschaft]
Monetary and Macroprudential Policy with Foreign Currency Loans
Anmerkungen:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments June 19, 2015 erstellt
Beschreibung:
In a number of countries a substantial proportion of mortgage loans is denominated in foreign currency. In this paper we demonstrate how their presence affects economic policy and agents' welfare. To this end we construct a small open economy model with housing loans denominated in domestic or foreign currency. The model is calibrated for Poland - a typical small open economy with a large share of foreign currency loans (FCL). We show that FCLs negatively affect the transmission of monetary policy. In contrast, their impact on the effectiveness of macroprudential policy is much weaker but positive. We also demonstrate that FCLs increase welfare when domestic interest rate shocks prevail and decrease it when risk premium (exchange rate) shocks dominate. Under a realistic calibration of the stochastic environment FCLs are welfare reducing. Finally, we show that regulatory policies that correct the share of FCLs may cause a short term slowdown