EconPapers    
Economics at your fingertips  
 

Performance of interest rate rules under credit market imperfections

Beatriz de Blas ()

Economic Modelling, 2009, vol. 26, issue 3, 586-596

Abstract: The stabilization effects of Taylor rules are analyzed in a limited participation framework with and without credit market imperfections in capital goods production. Financial frictions substantially amplify the impact of shocks, and also reinforce the stabilizing or destabilizing effects of interest rate rules on output. However, these effects are reversed relative to new Keynesian models: under limited participation, interest rate rules are stabilizing for productivity shocks, but imply an output-inflation tradeoff for demand shocks. Moreover, because financial frictions imply excessive fluctuation, stabilization via an interest rate rule can be a welfare-improving response to productivity shocks.

Keywords: Financial; frictions; Taylor; rules; Limited; participation; Stabilization; policy (search for similar items in EconPapers)
Date: 2009
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5) Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0264-9993(09)00015-7
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Performance of Interest Rate Rules under Credit Market Imperfections (2005) Downloads
Working Paper: Performance of interest rate rules under credit market imperfections (2003) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:26:y:2009:i:3:p:586-596

Access Statistics for this article

Economic Modelling is currently edited by S. Hall and P. Pauly

More articles in Economic Modelling from Elsevier
Bibliographic data for series maintained by Catherine Liu ().

 
Page updated 2022-10-09
Handle: RePEc:eee:ecmode:v:26:y:2009:i:3:p:586-596