Performance of interest rate rules under credit market imperfections
Beatriz de Blas Pérez
Authors registered in the RePEc Author Service: Beatriz de Blas ()
UC3M Working papers. Economics from Universidad Carlos III de Madrid. Departamento de EconomÃa
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. However, these effects are reversed relative to New Keynesian models: under limited participation, interest rate rules are stabilizing for technology 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 technology shocks.
New Economics Papers: this item is included in nep-fin, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed
Downloads: (external link)
Journal Article: Performance of interest rate rules under credit market imperfections (2009)
Working Paper: Performance of Interest Rate Rules under Credit Market Imperfections (2005)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:cte:werepe:we033813
Access Statistics for this paper
More papers in UC3M Working papers. Economics from Universidad Carlos III de Madrid. Departamento de EconomÃa
Bibliographic data for series maintained by Ana Poveda ().