A descriptive model of banking and aggregate demand
Jochen Mierau () and
DNB Working Papers from Netherlands Central Bank, Research Department
We integrate a banking sector into an accessible macroeconomic framework, which then provides new explanations for developments around the Global Financial Crisis. The analysis shows that growth of banking sector money supply may explain the secular decline in long-term interest rates before the crisis. A new bank funding channel of monetary transmission clarifies why even large increases in central bank policy rates could not reverse this trend. Our analysis challenges the view that monetary policy becomes ineffective in a liquidity trap, and shows that bank recapitalizations are more effective than fiscal expansions in restoring aggregate demand after a banking crisis.
Keywords: banking; aggregate demand; monetary transmission; global financial crisis (search for similar items in EconPapers)
JEL-codes: E32 E50 E63 G01 G21 G28 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed
Downloads: (external link)
Journal Article: A Descriptive Model of Banking and Aggregate Demand (2018)
Working Paper: A descriptive model of banking an aggregate demand (2016)
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:dnb:dnbwpp:500
Access Statistics for this paper
More papers in DNB Working Papers from Netherlands Central Bank, Research Department Contact information at EDIRC.
Bibliographic data for series maintained by Richard Heuver ().