engleski

Bilevel programming model determining some instruments and measures of monetary policy

One of the tasks of the Croatian National Bank (CNB) is to formulate and execute monetary policy. For the purpose of achieving the formulated monetary policy, the Croatian National Bank may adopt measures and instruments needed to regulate credit activity and liquidity of banks. One of them obliges the banks to allocate and maintain reserve requirements in the settlement account and in the vault or in a separate account with the Croatian National Bank. Reserve requirements are defined as a percentage determined with regard to the type, maturity, and size of deposits as well as increase in deposits and other liabilities of a bank. The problem of determining the reserve requirements is modeled as a bilevel mixed 0-1 programming problem. The objective of the leader (Croatian National Bank) is to minimize the value of household’ s loans determining different percentages of the reserve requirements for loans extended to households and enterprises. The objective of the followers (banks) is to maximize the profit. In order to solve the problem the heuristic based on tabu search is proposed. At the end some computational results are presented.

instruments and measures of monetary policy; mixed integer bilevel programming; heuristic

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