EconPapers    
Economics at your fingertips  
 

Monetary Policy and the Financing of Firms

Fiorella De Fiore (), Pedro Teles () and Oreste Tristani ()

American Economic Journal: Macroeconomics, 2011, vol. 3, issue 4, pages 112-42

Abstract: How should monetary policy respond to changes in financial conditions? We consider a simple model where firms are subject to shocks which may force them to default on their debt. Firms' assets and liabilities are nominal and predetermined. Monetary policy can therefore affect the real value of funds used to finance production. In this model, allowing for inflation volatility in response to aggregate shocks can be optimal; the optimal response to adverse financial shocks is to lower interest rates and to engineer some inflation; and the Taylor rule may implement allocations that have opposite cyclical properties to the optimal ones. (JEL G32, E31, E43, E44, E52)

JEL-codes: E31 E43 E44 E52 G32 (search for similar items in EconPapers)
Date: 2011
Note: DOI: 10.1257/mac.3.4.112
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (4) Track citations by RSS feed

Downloads: (external link)
http://www.aeaweb.org/articles.php?doi=10.1257/mac.3.4.112 (application/pdf)
http://www.aeaweb.org/aej/mac/data/2009-0075_data.zip (application/zip)
Access to full text is restricted to AEA members and institutional subscribers.

Related works:
Working Paper: Monetary Policy and the Financing of Firms (2009) Downloads
Working Paper: Monetary Policy and the Financing of Firms (2009) Downloads
Working Paper: Monetary Policy and the Financing of Firms (2009) Downloads
Working Paper: Monetary Policy and the Financing of Firms (2009) Downloads
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: http://EconPapers.repec.org/RePEc:aea:aejmac:v:3:y:2011:i:4:p:112-42

Ordering information: This journal article can be ordered from
http://www.aeaweb.org/subscribe.html

Access Statistics for this article

American Economic Journal: Macroeconomics is edited by Steven J. Davis

More articles in American Economic Journal: Macroeconomics from American Economic Association
Contact information at EDIRC.
Series data maintained by Jane Voros ().

 
Page updated 2014-04-02
Handle: RePEc:aea:aejmac:v:3:y:2011:i:4:p:112-42