Monetary Policy and Central Bank Balance Sheet Concerns
AbstractWe introduce a fiscally independent central bank with balance sheet concerns in the new Keynesian model. The central bank is subject to a budget constraint and state-contingent transfers from the treasury are not allowed. This change renders the standard optimal monetary policy solution non implementable. In addition to facing a budget constraint, when the central bank targets real capital, optimal monetary policy is substantially different from the standard case. In response to a cost-push shock, variation in inflation decreases at the cost of increased output gap variation; there is incomplete stabilization of aggregate demand and money demand shocks; response to a cost-push shock under discretion is similar to that under commitment in the standard model; and the central bank tracks real money balances.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by De Gruyter in its journal The B.E. Journal of Macroeconomics.
Volume (Year): 9 (2009)
Issue (Month): 1 (January)
Contact details of provider:
Web page: http://www.degruyter.com
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Ricardo Reis, 2010.
"Interpreting the Unconventional U.S. Monetary Policy of 2007-09,"
NBER Working Papers
15662, National Bureau of Economic Research, Inc.
- Ricardo Reis, 2009. "Interpreting the Unconventional U.S. Monetary Policy of 2007-09," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 40(2 (Fall)), pages 119-182.
- Reis, Ricardo, 2010. "Interpreting the Unconventional U.S. Monetary Policy of 2007-09," CEPR Discussion Papers 7635, C.E.P.R. Discussion Papers.
- Ricardo Reis, 2010. "Interpreting the Unconventional U.S. Monetary Policy of 2007-09," Discussion Papers 0910-13, Columbia University, Department of Economics.
- Seok Gil Park, 2012. "Central Banks Quasi-Fiscal Policies and Inflation," IMF Working Papers 12/14, International Monetary Fund.
- Andrew Swiston & Florencia Frantischek & Przemek Gajdeczka & Alexander Herman, 2014. "Central Bank Financial Strength in Central America and the Dominican Republic," IMF Working Papers 14/87, International Monetary Fund.
- Dalla Pellegrina, L. & Masciandaro, D. & Pansini, R.V., 2013. "The central banker as prudential supervisor: Does independence matter?," Journal of Financial Stability, Elsevier, vol. 9(3), pages 415-427.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Peter Golla).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.