Conventional and Unconventional Monetary Policy with Endogenous Collateral Constraints
Susan Schommer and
Michael Woodford ()
American Economic Journal: Macroeconomics, 2015, vol. 7, issue 1, 1-43
We consider the effects of central bank purchases of a risky asset as an additional dimension of policy alongside "conventional" interest rate policy in a general-equilibrium model of asset pricing with endogenous collateral constraints. The effects of asset purchases depend on the way that they affect collateral constraints. We show that under some circumstances, central bank purchases relax financial constraints, increase aggregate demand, and may even achieve a Pareto improvement; but in other cases, they tighten financial constraints, reduce aggregate demand, and lower welfare. The latter case is almost certainly the one that arises if central bank purchases are sufficiently large. (JEL D51, E43, E44, E52, E58)
JEL-codes: D51 E43 E44 E52 E58 (search for similar items in EconPapers)
Note: DOI: 10.1257/mac.20140002
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Working Paper: Conventional and Unconventional Monetary Policy with Endogenous Collateral Constraints (2014)
Chapter: Conventional and Unconventional Monetary Policy with Endogenous Collateral Constraints (2013)
Working Paper: Conventional and Unconventional Monetary Policy with Endogenous Collateral Constraints (2013)
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