Large Scale Asset Purchases with Segmented Mortgage and Corporate Loan Markets
Meixing Dai (),
Frédéric Dufourt () and
Qiao Zhang ()
Working Papers from HAL
We introduce Large Scale Asset Purchases (LSAPs) in a New-Keynesian DSGE model that features distinct mortgage and corporate loan markets. We show that following a significant disruption of financial intermediation, central-bank purchases of mortgage-backed securities (MBS) are uniformly less effective at easing credit market conditions and stabilizing economic activity than outright purchases of corporate bonds. Moreover, the size of the effects crucially depends on the extent to which credit markets are segmented, i.e. to which a "portfolio balance channel" is at work in the economy. More segmented credit markets imply larger, but more local effects of particular asset purchases. With strongly segmented credit markets, large scale purchases of MBS are useful to stabilize the housing market but do little to mitigate the contractionary effect of the crisis on employment and output.
Keywords: corporate bonds; unconventional monetary policy; financial frictions; mortgage-backed securities (MBS); large scale asset purchases (LSAPs); portfolio balance channel; credit spreads (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban, nep-dge and nep-ure
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Working Paper: Large Scale Asset Purchases with Segmented Mortgage and Corporate Loan Markets (2013)
Working Paper: Large Scale Asset Purchases with segmented mortgage and corporate loan markets (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:wpaper:halshs-00842279
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