This paper, after providing a critique of standard monetary theory based on the transactions demand for money, examines the effect of monetary policy (changes in reserve requires and open market operations) in a model with competitive, risk averse banks. The effects of changes in bank net worth...

This paper considers the implications, for macroeconomic modeling and for monetary policy, of the interrelationships among money, credit and nonfinancial economic activity. Data for the United States since World War II show that the volume of outstanding credit is as closely related to economic...

With loan commitments negotiated in advance, the use of tight money to restrain nominal spending has asymmetric effects upon different categories of borrowers. This can reduce efficiency, even though aggregate demand is stabilized. This is illustrated in the context of an equilibrium model of...

This paper summarizes the macro-economic and, in particular, monetary and financial market implications of recent developments in the micro-economic theory of imperfect information. These micro-economic models which lead to credit-rationing on the one hand and limitations in the availability of...

We study models of credit with limited commitment, which implies endogenous borrowing constraints. We show that there are multiple stationary equilibria, as well as nonstationary equilibria, including some that display deterministic cyclic and chaotic dynamics. There are also stochastic...

In the aftermath of the Great Recession, there is a growing consensus, even among central bank officials, concerning the limitations of monetary policy. This paper provides an explanation for the ineffectiveness of monetary policy, and in doing so provides a new framework for thinking about...

This paper reviews empirical findings, econometric issues,and theoretical results bearing upon the "monetary vs. fiscal policy" debate that began with the 1963 Friedrnan-Meiselman study.The main substantive conclusions are not very dramatic.The clearest is that an open-market increase in the...

We examine a central bank's endogenous choice of degree of control and degree of transparency, under both commitment and discretion. Under commitment, we find that the deliberate choice of sloppy control is far less likely under a standard central-bank loss function than reported for a less...

The 'credit channel' theory of monetary policy transmission holds that informational frictions in credit markets worsen during tight- money periods. The resulting increase in the external finance premium--the difference in cost between internal and external funds-- enhances the effects of...

This paper is concerned with delineating conditions under which public financial policies have no real and/or price effects. In the absence of intergenerational distribution effects, public financial policy is irrelevant:an increase in government debt (whether indexed or not), an exchange of...