External Constraints on Monetary Policy and the Financial Accelerator
Mark Gertler,
Simon Gilchrist and
Fabio M. Natalucci
Journal of Money, Credit and Banking, 2007, vol. 39, issue 2-3, 295-330
Abstract:
We develop a small open economy macroeconomic model where financial conditions influence aggregate behavior. Our goal is to explore the connection between the exchange rate regime and financial distress. We first show that a calibrated version of the model captures well the behavior of the Korean economy during its financial crisis period of 1997-98. In particular, the model accounts for the sharp increase in lending rates and the large drop in output, employment, investment, and measured productivity. The financial market frictions play an important role, further, explaining roughly half the decline in overall economic activity. We then perform some counterfactual exercises to illustrate how the fixed exchange rate regime likely exacerbated the crisis by tying the hands of monetary policy. Copyright 2007 The Ohio State University.
Date: 2007
References: Add references at CitEc
Citations: View citations in EconPapers (350)
There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.
Related works:
Journal Article: External Constraints on Monetary Policy and the Financial Accelerator (2007) 
Working Paper: External constraints on monetary policy and the financial accelerator (2003) 
Working Paper: External Constraints on Monetary Policy and the Financial Accelerator (2003) 
Journal Article: External constraints on monetary policy and the financial accelerator (2001) 
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:mcb:jmoncb:v:39:y:2007:i:2-3:p:295-330
Access Statistics for this article
Journal of Money, Credit and Banking is currently edited by Robert deYoung, Paul Evans, Pok-Sang Lam and Kenneth D. West
More articles in Journal of Money, Credit and Banking from Blackwell Publishing
Bibliographic data for series maintained by Wiley-Blackwell Digital Licensing (jdl@wiley.com) and Christopher F. Baum (baum@bc.edu).