Do bank-based financial systems reduce macroeconomic volatility by smoothing interest rates?
This paper investigates the business cycle implications of limited pass-through from market interest rates to retail interest rates based on a calibrated sticky price model. The main result of the paper is that limited interest rate pass-through reduces output volatility to a modest extent as long as the pass-through is complete at least in the long-run. Larger volatility reductions are obtained if the long-run pass-through is incomplete. However, in this case output volatility is reduced at the cost of higher inflation volatility.
Year of publication: |
2008
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Authors: | Scharler, Johann |
Published in: |
Journal of Macroeconomics. - Elsevier, ISSN 0164-0704. - Vol. 30.2008, 3, p. 1207-1221
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Publisher: |
Elsevier |
Saved in:
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