Collateralized Assets Prices and Monetary Policy

Mauricio Arango ()

Revista de Economía del Rosario, 2019, vol. 22, issue 2, No 17984, 155-185

Abstract: A well-informed and cautious financial system can improve the welfare outcome of an economy by making lenders surplus to borrowers. Nevertheless, in a crisis, the behavior of the financial system can become an amplifier of it, given that credit approval conditions rarely meet the standards. Therefore, a credit crunch may occur even in a low-interest rates environment. This paper illustrates the aforementioned point by developing a general equilibrium model where the collateral credit condition defines the prudential behavior of the financial system. It and other conditions amplify the magnitude of a negative productivity shock.

Keywords: Monetary policy; credit; collateralized assets; general equilibrium (search for similar items in EconPapers)
JEL-codes: E52 E58 G21 (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:col:000151:017984

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