Collateral Constraints, Sticky Wages, and Monetary Policy

Kwang Hwan Kim and Joonseok Oh
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Kwang Hwan Kim: Yonsei University
Joonseok Oh: Yonsei University

No 2014rwp-63, Working papers from Yonsei University, Yonsei Economics Research Institute

Abstract: This paper investigates the role of collateral constraints in the transmission of monetary policy shocks in a two-sector sticky price general equilibrium model with nondurable and durable goods. While many researchers have stressed the role of collateral constraints in one-sector sticky price model, it has been relatively less explored in the two-sector sticky price model. This study shows that nominal wage rigidity is crucial for collateral constraints to accelerate the effects of monetary policy shocks on durable spending in the two-sector sticky price general equilibrium model.

Keywords: durable goods; collateral constraints; sticky nominal wages (search for similar items in EconPapers)
JEL-codes: E21 E23 E31 E44 E52 (search for similar items in EconPapers)
Pages: 25pages
Date: 2014-01
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