The transmission of monetary policy through redistributions and durable purchases
Vincent Sterk and
Silvana Tenreyro ()
LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library
Using a tractable OLG model with government debt, we study a redistribution channel for the transmission of monetary policy. Expansionary open-market operations generate a negative wealth effect, increasing households' incentives to save and pushing down the real interest rate. This leads to a substitution towards durables, generating a temporary boom in the durable-good sector. With search and matching frictions, the fall in interest rates causes an increase in labor demand, raising aggregate employment. The model mimics the empirical responses of key macroeconomic variables to monetary policy interventions. The fiscal policy stance plays a key role in the transmission mechanism.
Keywords: Open Market Operations; Durables; Heterogeneous Agents (search for similar items in EconPapers)
JEL-codes: E1 E31 E32 E52 E58 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18) Track citations by RSS feed
Published in Journal of Monetary Economics, 4, July, 2018. ISSN: 0304-3932
Downloads: (external link)
http://eprints.lse.ac.uk/89056/ Open access version. (application/pdf)
Journal Article: The transmission of monetary policy through redistributions and durable purchases (2018)
Working Paper: The Transmission of Monetary Policy through Redistributions and Durable Purchases (2016)
Working Paper: The Transmission of Monetary Policy through Redistributions and Durable Purchases (2015)
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:ehl:lserod:89056
Access Statistics for this paper
More papers in LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library LSE Library Portugal Street London, WC2A 2HD, U.K.. Contact information at EDIRC.
Bibliographic data for series maintained by LSERO Manager ().