Monetary Policy in a Channel System

Aleksander Berentsen and Cyril Monet

No 295, IEW - Working Papers from Institute for Empirical Research in Economics - University of Zurich

Abstract: This paper studies the theoretical properties of a channel system of interestrate control in a dynamic general equilibrium model. Agents are subject to liquidity shocks which can be partially insured in a secured money market, or at a standing facility operated by the central bank. We show that it is optimal to have a strictly positive interest rate corridor and that a shift of the corridor affects the money market rate one for one. Moreover, the central bank can tighten its policy without changing its policy rate by simply increasing the corridor symmetrically around the policy rate.

Keywords: Monetary Policy; Interest Rates; Search (search for similar items in EconPapers)
JEL-codes: D83 E40 E50 (search for similar items in EconPapers)
Date: 2006-07
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Monetary policy in a channel system (2008)
Working Paper: Monetary policy in a channel system (2008)
Working Paper: Monetary Policy in a Channel System (2007)
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