Abstract: By establishing the MS-DSGE model that includes the changes in the three zone system of the dual pillar policy portfolio, this paper uses the counterfactual method to investigate the rational expectations effect of the changes in the dual pillar policy portfolio on the credit cycle fluctuations. The empirical results indicate that the impact of the dual pillar policy combination on the fluctuation pattern of the credit cycle is mainly reflected in the short term; Under the dual pillar combination of moderately loose monetary policy and macro prudential policy, the credit response shows abnormal changes in both path and amplitude compared to the other two policy combinations; When the rational expectations of economic entities is included in the DSGE model framework, compared with the results of the DSGE model that is not included, a significant rational expectations effect can be observed.

Keywords: dual pillar policy; Rational expectations; Credit cycle; MS-DSGE model;