The financial accelerator and monetary policy rules

Gunes Kamber and Christoph Thoenissen

No DP2012/01, Reserve Bank of New Zealand Discussion Paper Series from Reserve Bank of New Zealand

Abstract: The ability of financial frictions to amplify the output response of monetary policy, as in the financial accelerator model of Bernanke et al (1999), is analysed for a wider class of policy rules where the policy interest rate responds to both inflation and the output gap. When policy makers respond to the output gap as well as inflation, the standard financial accelerator model reacts less to an interest rate shock than does a comparable model without an operational financial accelerator mechanism. In recessions, when firm-specific volatility rises, financial acceleration due to financial frictions is further reduced, even under pure inflation targeting.

JEL-codes: E32 E52 (search for similar items in EconPapers)
Pages: 22 p.
Date: 2012-02
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:
Journal Article: The financial accelerator and monetary policy rules (2012)
Working Paper: The financial accelerator and monetary policy rules (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:nzb:nzbdps:2012/01

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