Monetary Policy in a Channel System

Aleksander Berentsen () and Cyril Monnet ()

No CESifo Working Paper No. 1929, CESifo Working Paper Series from CESifo Group Munich

Abstract: Channel systems for conducting monetary policy are becoming increasingly popular. Despite their popularity, the consequences of implementing policy with a channel system are not well understood. We develop a general equilibrium framework of a channel system and investigate the optimal policy. A novel aspect of the channel system is that a central bank can "tighten" or "loosen" its policy without changing its target rate by increasing the interest-rate spread symmetrically around the target rate. This questions the characterization of optimal policy through interest-rate rules, as done in a large body of the literature on the optimal design of interest-rate rules.

Keywords: monetary policy; interest rates; search (search for similar items in EconPapers)
JEL-codes: D83 E40 E50 (search for similar items in EconPapers)
Date: 2007
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Related works:
Working Paper: Monetary Policy in a Channel System (2006)
Working Paper: Monetary policy in a channel system (2008)
Journal Article: Monetary policy in a channel system (2008)
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