The Bank Multiplier and A New Mechanism for the Transmission of the Monetary Policy

Ahmed Mehedi Nizam

MPRA Paper from University Library of Munich, Germany

Abstract: The concept of economic multiplier has been extensively used in the design and analysis of the fiscal policy. However, it has never been used to analyse the impact of nominal interest income received by the depositors through the banking channel on the total output. Here, we investigate the impact of nominal interest income on the macroeconomy using multiplier theory. We define and calculate the corresponding multiplier values algebraically and then we empirically calculate them using impulse response analysis. Along the way, we have shown a new mechanism for the transmission of the monetary policy decision which transcends through, as we call it here, the nominal interest income channel.

Keywords: nominal interest expense; nominal lending rate; nominal interest rate; domestic credit; GDP; economic multiplier; monetary policy transmission mechanism; banking (search for similar items in EconPapers)
JEL-codes: E43 E50 E52 E58 G20 G21 (search for similar items in EconPapers)
Date: 2019-02-02
New Economics Papers: this item is included in nep-cba and nep-mac
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