Monetary policy transmission with endogenous central bank responses in TANK

Lilia Maliar and Christopher Naubert

Journal of Economic Dynamics and Control, 2025, vol. 178, issue C

Abstract: We study how the transmission of monetary policy innovations is affected by the endogenous response of the central bank to macroeconomic aggregates in a two-agent New Keynesian model. We focus on how the stance of monetary policy and the fraction of savers in the economy affect transmission. We show that the indirect effect of an innovation is negative when the indirect real rate effect exceeds the indirect income effect. The relative magnitude of the indirect real rate effect increases with the share of savers and the strength of the central bank's response and decreases with the horizon of the innovation.

Keywords: New Keynesian model; TANK; Redistribution; Monetary policy; Interest rate rules (search for similar items in EconPapers)
JEL-codes: C61 C63 C68 E31 E52 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:178:y:2025:i:c:s0165188925001125

DOI: 10.1016/j.jedc.2025.105146

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