Modelling and simulating the banking sectors of the US, Germany and the UK
Pub. Date
19 August, 2012
Pub. Type
Authors
The need to understand the dynamics and after-effects of the recent financial crisis,
the evolution of macroprudential surveillance and the introduction of macroprudential
regulation all require appropriate macroeconomic models of financial institutions and
markets. We present models of the banking systems of the UK, US and Germany integrated
into the NiGEM global macroeconomic model. These estimated models permit an evaluation
both of the effectiveness of macro-prudential policies and their interaction with monetary and
fiscal policy. A key policy implication is to remind us that tightening of regulation is not a
“free good” but does impact on the economy via the cost of credit. Meanwhile, the impact of
macroprudential policies is quite small on the overall economy, suggesting their use in overall
macroeconomic stabilisation as a counterpart to monetary policy may be limited although the
effect on lending growth and hence potentially in restraining credit booms is more marked.
We contend that increasingly active macroprudential policies will make such models as those
presented here essential to a correct ongoing calibration and evaluation of policy.
Related Blog Posts
Blog
Sticky Inflation and Sluggish Growth: What Lies Ahead for the UK Economy
15 May 2023
5 min read
Blog
Inflation Rises to 10.4 per cent with a Bounce Back from the Big January Sales
22 Mar 2023
10 min read
Related Projects
Related News
Related Publications
publication
Finance, Business Investment and Productivity
11 May 2023
UK Economic Outlook Box Analysis
publication
Commentary: Monetary and Fiscal Policy Redux – The Mini-Budget
04 May 2023
National Institute Economic Review
Related events
2022 Dow Lecture: The Economy and Policy Trade-Off
17:00 to 18:00
23 February, 2022
Autumn Economic Forum
11:00 to 12:00
12 November, 2021
