Economics Professor authors book on monetary policy and financial regulation

Pierre-Richard Agénor, Hallsworth Professor of international Macroeconomics and Development Economics, has authored a new book, presenting an integrated analysis of how financial frictions can be accounted for in macroeconomic models.

Book front cover. Monetary Policy and Macroprudential Regulation with Financial Frictions.Since the global financial crisis, there has been a renewed effort to emphasize financial frictions in designing closed- and open-economy macroeconomic models for monetary and macroprudential policy analysis. Professor Agénor draws on the extensive literature of the past decade, as well as his own contributions, to offer a unified set of theoretical and quantitative macroeconomic models with financial frictions to explore the issues that have emerged in the wake of the crisis.

In the book, Professor Agénor explores how the financial system amplifies shocks originating elsewhere in the economy and the extent to which central banks should account for financial stability considerations in the conduct of monetary policy. He also considers whether national central banks and regulators should coordinate their policies to promote financial stability; and how much countercyclical macroprudential policies should be coordinated at the international level to mitigate financial spillovers across countries.

The book focuses on upper-middle-income countries, which differ from advanced economies in terms of both their structural features (which include a financial sector dominated by banks, weak supervisory capacity, and a high degree of vulnerability to external shocks) and their long-standing policy challenges. However, some of the analytical insights and broad policy lessons that can be drawn from the book will be of relevance to advanced economies as well. 

Prof Pierre-Richard AgenorProfessor Agénor is Hallsworth Professor of International Macroeconomics and Development Economics in the School of Social Sciences. He has published numerous articles in leading professional journals and made contributions to a wide range of fields and topics in economics, including international macroeconomics, development economics, growth theory, labour economics, financial regulation, gender equality, and poverty analysis.

Monetary Policy and Macroprudential Regulation with Financial Frictions is available now through MIT Press.

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