Monetary and Macroprudential Policy and Welfare in An Estimated Four-Agent New Keynesian Model

We examine the social and agent-specific welfare effects of monetary and macroprudential policy in a four-agent estimated macroeconomic model, consisting of ''banked simple house- holds', underbanked simple households', 'firm owners', and 'bank owners'. Optimal capital requirement and loan loss provisions ratios, are shown to improve all agent-specific and social welfare, but imply smaller gains for simple households and firm owners that rely on credit. Countercyclical capital buffers support firm owners and bank owners, with smaller gains for the two simple households. Countercyclical loan loss provisions improve social welfare only for specific shocks and benefit the 'simple underbanked household' and 'firm-owners' at the expense of 'bank-owners' and 'banked simple households'