Scandinavian Working Papers in Economics

Working Paper Series,
Sveriges Riksbank (Central Bank of Sweden)

No 392: The interaction between macroprudential and monetary policies: The cases of Norway and Sweden

Jin Cao (), Valeriya Dinger (), Anna Grodecka (), Ragnar Juelsrud () and Xin Zhang ()
Additional contact information
Jin Cao: Norges Bank
Valeriya Dinger: University of Osnarbruck and and Leeds University Business School
Anna Grodecka: Department of Economics, Lund University and Knut Wicksell Centre for Financial Studies
Ragnar Juelsrud: Norges Bank
Xin Zhang: Research Department, Central Bank of Sweden, Postal: Sveriges Riksbank, SE-103 37 Stockholm, Sweden

Abstract: To shed light on the interaction between macroprudential and monetary policies, we study the inward transmission of foreign monetary policy in conjunction with domestic macroprudential and monetary policies in Norway and Sweden. Using detailed bank-level data we show how Norwegian and Swedish banks' lending reacts to monetary policy surprises arising abroad, controlling for the domestic macroprudential stance and the interaction between monetary and macroprudential policies. In both countries, the domestic macroprudential policy helps mitigate the effects arising after foreign monetary surprises.

Keywords: monetary policy; macroprudential policy; policy interactions; bank lending; inward transmission; international bank lending channel

JEL-codes: E43; E52; E58; F34; F42; G21; G28

49 pages, July 1, 2020

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