The balance sheet channel

Ethan Cohen-Cole () and Enrique Martínez García ()

No QAU08-7, Supervisory Research and Analysis Working Papers from Federal Reserve Bank of Boston

Abstract: In this paper, we study the role of the credit channel of monetary policy in a synthesis model of the economy. Through the use of a well-specified banking sector and a regulatory capital constraint on lending, we provide an alternate mechanism that can potentially explain the periods of asymmetry in monetary policy without appealing to ad-hoc central bank preferences. This is accomplished through the characterization of the external finance premium that includes bank leverage and systemic risk.

Keywords: Monetary; policy (search for similar items in EconPapers)
Date: 2008
New Economics Papers: this item is included in nep-cba, nep-dge, nep-mac and nep-mon
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Citations: View citations in EconPapers (3)

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Related works:
Chapter: The Balance Sheet Channel (2011)
Working Paper: The Balance Sheet Channel (2009)
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