Finance and Credit in a Model of Monetary Policy
Jagjit Chadha () and
No 471, NIESR Discussion Papers from National Institute of Economic and Social Research
Economies is the extent to which a workhorse advanced economy model can yield important insights for monetary policy-making. We note that the standard sticky-price, monopolistically competitive model does not allow analysis of money and credit dynamics and led to a concentration of research on simple interest rate reaction functions. Time-varying financial frictions tend to act as a tax on intermediation activities and so can vary output in a significant manner. In this paper, we consider the implications of financial frictions for baseline monetary policy using a model calibrated on Indian data and find that a simple interest rate reaction function may not be welfare maximising.
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed
Downloads: (external link)
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:nsr:niesrd:471
Access Statistics for this paper
More papers in NIESR Discussion Papers from National Institute of Economic and Social Research 2 Dean Trench Street Smith Square London SW1P 3HE.
Series data maintained by Library & Information Manager ().