Anderson Mutter Teixeira

Should macroprudential policy respond to fiscal conditions and, if so, to which fiscal financial state variable? We study this question in a medium-scale DSGE model with heterogeneous households, banking frictions, and an occasionally binding housingcollateral constraint. In a benchmark architecture in which patient households are the residual holders of government bonds, fiscally contingent debt-aware macroprudential policy dampens leverage-driven amplification, lowers GDP-scaled present-value spending multipliers, and raises welfare.Our main result emerges in the sovereign–bank architecture, where banks hold sovereign bonds and fiscal deterioration affects private intermediation through bank sovereign exposure. In that environment, reacting to aggregate public debt is too coarse: it worsens collateral dynamics and lowers welfare. By contrast, a nexus-based rule conditioned on sovereign exposure relative to bank capital improves financial stabilization, mitigates collateral stress, lowers fiscal multipliers, and raises welfare. The main lesson is that debt awareness is not architecture-invariant: once sovereign risk is intermediated by banks, the relevant macroprudential target is the sovereign–bank nexus rather than aggregate public debt.