Financial Intermediation and the Effectiveness of Macroprudential Policies

We analyze the effects of macroprudential policies in a business cycle framework with imperfect financial intermediation a la Gertler and Kiyotaki (2010). We show that macroprudential policies that act as proportional taxes on banks' deposits (or assets) are ineffective if the tax proceeds are rebated to the banks so that the policies are revenue-neutral. On the other hand, revenue-non neutral macroprudential policies transmit through a net worth channel and are effective in containing credit growth. We also show that "leaning-against-the-wind" macroprudential policies are able to stabilize economic fluctuations and improve welfare when they are revenue-non-neutral