Eurozone macro-prudential policies have large cross-border effects – ECB paper

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Macro-prudential policies in the eurozone have significant cross-border spillovers, a working paper published by the European Central Bank finds.

In Macro-prudential policy in a monetary union with cross-border banking, Matthieu Darracq Pariès, Christoffer Kok and Elena Rancoita present a two-country dynamic stochastic general equilibrium model. The authors calibrate their model for the four largest euro area countries – France, Germany, Italy and Spain.

They pay particular attention to

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