(Un)anticipated monetary policy in a DSGE model with a shadow banking system

Fabio Verona, Manuel Martins and Ines Drumond ()

No 56, IMFS Working Paper Series from Goethe University Frankfurt, Institute for Monetary and Financial Stability (IMFS)

Abstract: Motivated by the U.S. events of the 2000s, we address whether a too low for too long interest rate policy may generate a boom-bust cycle. We simulate anticipated and unanticipated monetary policies in state-of-the-art DSGE models and in a model with bond financing via a shadow banking system, in which the bond spread is calibrated for normal and optimistic times. Our results suggest that the U.S. boom-bust was caused by the combination of (i) too low for too long interest rates, (ii) excessive optimism and (iii) a failure of agents to anticipate the extent of the abnormally favorable conditions.

Keywords: DSGE model; shadow banking system; too low for too long; boom-bust (search for similar items in EconPapers)
JEL-codes: E32 E44 E52 G24 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/97743/1/IMFS_WP_56.pdf (application/pdf)

Related works:
Journal Article: (Un)anticipated Monetary Policy in a DSGE Model with a Shadow Banking System (2013)
Working Paper: (Un)anticipated monetary policy in a DSGE model with a shadow banking system (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:imfswp:56

Access Statistics for this paper

More papers in IMFS Working Paper Series from Goethe University Frankfurt, Institute for Monetary and Financial Stability (IMFS) Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().