Lithuania in the euro area: monetary transmission and macroprudential policies
In this paper, we develop a two-country monetary union new Keynesian general equilibrium model with housing and collateral constraints, to be calibrated for Lithuania and the rest of the euro area. Within this setting, and following the recent entrance of Lithuania in the EMU, the aim of this paper...
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| Format: | Article |
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Taylor and Francis
2016
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| Online Access: | https://eprints.nottingham.ac.uk/38055/ |
| _version_ | 1848795587375267840 |
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| author | Rubio, Margarita Comunale, Mariarosaria |
| author_facet | Rubio, Margarita Comunale, Mariarosaria |
| author_sort | Rubio, Margarita |
| building | Nottingham Research Data Repository |
| collection | Online Access |
| description | In this paper, we develop a two-country monetary union new Keynesian general equilibrium model with housing and collateral constraints, to be calibrated for Lithuania and the rest of the euro area. Within this setting, and following the recent entrance of Lithuania in the EMU, the aim of this paper is twofold. First, we study how shocks are transmitted differently in the two regions, considering the recent common monetary policy. Then, we analyze how macroprudential policies should be conducted in Lithuania, in the context of the EMU. As a macroprudential tool, we propose a decentralized Taylor-type rule for the LTV which responds to national deviations in output and house prices. We find that, given the housing market features in Lithuania, common shocks are transmitted more strongly in this country than in the rest of the euro area. In terms of macroprudential policies, results show that the optimal policy in Lithuania with respect to the euro area may have a different intensity and that it delivers substantial benefits in terms of financial stability. |
| first_indexed | 2025-11-14T19:34:27Z |
| format | Article |
| id | nottingham-38055 |
| institution | University of Nottingham Malaysia Campus |
| institution_category | Local University |
| last_indexed | 2025-11-14T19:34:27Z |
| publishDate | 2016 |
| publisher | Taylor and Francis |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | nottingham-380552020-05-04T18:25:29Z https://eprints.nottingham.ac.uk/38055/ Lithuania in the euro area: monetary transmission and macroprudential policies Rubio, Margarita Comunale, Mariarosaria In this paper, we develop a two-country monetary union new Keynesian general equilibrium model with housing and collateral constraints, to be calibrated for Lithuania and the rest of the euro area. Within this setting, and following the recent entrance of Lithuania in the EMU, the aim of this paper is twofold. First, we study how shocks are transmitted differently in the two regions, considering the recent common monetary policy. Then, we analyze how macroprudential policies should be conducted in Lithuania, in the context of the EMU. As a macroprudential tool, we propose a decentralized Taylor-type rule for the LTV which responds to national deviations in output and house prices. We find that, given the housing market features in Lithuania, common shocks are transmitted more strongly in this country than in the rest of the euro area. In terms of macroprudential policies, results show that the optimal policy in Lithuania with respect to the euro area may have a different intensity and that it delivers substantial benefits in terms of financial stability. Taylor and Francis 2016-12-16 Article PeerReviewed Rubio, Margarita and Comunale, Mariarosaria (2016) Lithuania in the euro area: monetary transmission and macroprudential policies. Eastern European Economics, 55 (1). pp. 29-49. ISSN 1557-9298 Macroprudential policy housing market LTV monetary union Önancial stability http://www.tandfonline.com/doi/full/10.1080/00128775.2016.1255558 doi:10.1080/00128775.2016.1255558 doi:10.1080/00128775.2016.1255558 |
| spellingShingle | Macroprudential policy housing market LTV monetary union Önancial stability Rubio, Margarita Comunale, Mariarosaria Lithuania in the euro area: monetary transmission and macroprudential policies |
| title | Lithuania in the euro area: monetary transmission and macroprudential policies |
| title_full | Lithuania in the euro area: monetary transmission and macroprudential policies |
| title_fullStr | Lithuania in the euro area: monetary transmission and macroprudential policies |
| title_full_unstemmed | Lithuania in the euro area: monetary transmission and macroprudential policies |
| title_short | Lithuania in the euro area: monetary transmission and macroprudential policies |
| title_sort | lithuania in the euro area: monetary transmission and macroprudential policies |
| topic | Macroprudential policy housing market LTV monetary union Önancial stability |
| url | https://eprints.nottingham.ac.uk/38055/ https://eprints.nottingham.ac.uk/38055/ https://eprints.nottingham.ac.uk/38055/ |