The interaction between macroprudential and monetary policies: The cases of Norway and 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, domestic macroprudential policy helps mitigate the effects arising from foreign monetary surprises. © 2020 John Wiley & Sons Ltd