01843cas a2200265 a 4500 AALejournalIMF015856 230101c9999 xx r poo 0 0eng d 5.00 USD 9781513511078 1018-5941 BD-DhAAL BD-DhAAL Biljanovska, Nina. Optimal Macroprudential Policy and Asset Price Bubbles / Nina Biljanovska, Lucyna Gornicka, Alexandros Vardoulakis. Washington, D.C. : International Monetary Fund, 2019. 1 online resource (44 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students An asset bubble relaxes collateral constraints and increases borrowing by credit-constrained agents. At the same time, as the bubble deflates when constraints start binding, it amplifies downturns. We show analytically and quantitatively that the macroprudential policy should optimally respond to building asset price bubbles non-monotonically depending on the underlying level of indebtedness. If the level of debt is moderate, policy should accommodate the bubble to reduce the incidence of a binding collateral constraint. If debt is elevated, policy should lean against the bubble more aggressively to mitigate the pecuniary externalities from a deflating bubble when constraints bind. Mode of access: Internet Gornicka, Lucyna. Vardoulakis, Alexandros. IMF Working Papers; Working Paper ; No. 2019/184 Full text available on IMF http://elibrary.imf.org/view/journals/001/2019/184/001.2019.issue-184-en.xml IMF e-Library