Choi, Dong Beom; Eisenbach, Thomas M.; Yorulmazer, Tanju - Federal Reserve Bank of New York - 2015
We build a general equilibrium model with financial frictions that impede the effectiveness of monetary policy in … risk. Therefore, these agents respond less than the agents with lower productivity to monetary policy that reduces the … deterioration. When this feedback is strong, monetary policy can lose its effectiveness in stimulating aggregate output even if it …