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Uncertainty, Financial Frictions, and Investment Dynamics

Gilchrist, Simon - 2014

investment; the impact of uncertainty on investment occurs primarily through changes in credit spreads; and innovations in credit … spreads have a strong effect on investment, irrespective of the level of uncertainty. These findings raise a question … financial shocks. By influencing the effective supply of credit, both types of shocks exert a powerful effect on investment and …

Persistent link: https://www.econbiz.de/10013046471

A Utility-Based Welfare Criterion in a Model with Endogenous Capital Accumulation

Edge, Rochelle M. - 2004

This paper extends the utility-based welfare criterion developed by Rotemberg and Woodford (1997) and Woodford (2003) to a model with endogenous capital accumulation. The welfare criterion obtained for this model shares several features with the corresponding expressions that have been derived...

Persistent link: https://www.econbiz.de/10014073149

Misallocation Costs of Digging Deeper into the Central Bank Toolkit

Kurtzman, Robert J. - 2019

Central bank large-scale asset purchases, such as the purchase of securities of nonfinancial firms, can induce a misallocation of resources through their heterogeneous effect on firm cost of capital. First, we analytically demonstrate the mechanism in a two-period model. We then evaluate the...

Persistent link: https://www.econbiz.de/10012901030

Homeowner Balance Sheets and Monetary Policy

Aladangady, Aditya - 2015

This paper empirically identifies an important channel through which monetary policy affects consumer spending: homeowner balance sheets. A monetary loosening increases home values, thereby strengthening homeowner balance sheets and stimulating household spending due to a combination of...

Persistent link: https://www.econbiz.de/10013031609

The continuing validity of monetary policy autonomy under floating exchange rates

Nelson, Edward - 2017

Economic research in recent years has given considerable prominence to the issue of whether a floating exchange rate provides autonomy with regard to monetary policy to a central bank whose economy is highly open. In particular, Rey (2016) has argued that inflation-targeting advanced economies...

Persistent link: https://www.econbiz.de/10011803325

Monetary Policy, Self-Fulfilling Expectations and the U.S. Business Cycle

Nicolò, Giovanni - 2020

I estimate a medium-scale New-Keynesian model and relax the conventional assumption that the central bank adopted an active monetary policy by pursuing inflation and output stability over the entire post-war period. Even after accounting for a rich structure, I find that monetary policy was...

Persistent link: https://www.econbiz.de/10012834043

Reputation and Liquidity Traps

Nakata, Taisuke - 2014

Can the central bank credibly commit to keeping the nominal interest rate low for an extended period of time in the aftermath of a deep recession? By analyzing credible plans in a sticky-price economy with occasionally binding zero lower bound constraints, I find that the answer is yes if...

Persistent link: https://www.econbiz.de/10013050097

The Risk Channel of Monetary Policy

de Groot, Oliver - 2014

This paper examines how monetary policy affects the riskiness of the financial sector's aggregate balance sheet, a mechanism referred to as the risk channel of monetary policy. I study the risk channel in a DSGE model with nominal frictions and a banking sector that can issue both outside equity...

Persistent link: https://www.econbiz.de/10013054300

The Risk-Adjusted Monetary Policy Rule

Nakata, Taisuke - 2016

Macroeconomists are increasingly using nonlinear models to account for the effects of risk in the analysis of business cycles. In the monetary business cycle models widely used at central banks, an explicit recognition of risk generates a wedge between the inflation-target parameter in the...

Persistent link: https://www.econbiz.de/10012985460

The Risky Steady State and the Interest Rate Lower Bound

Hills, Timothy - 2016

Even when the policy rate is currently not constrained by its effective lower bound (ELB), the possibility that the policy rate will become constrained in the future lowers today's inflation by creating tail risk in future inflation and thus reducing expected inflation. In an empirically rich...

Persistent link: https://www.econbiz.de/10013210370

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