Money-Multiplier Shocks in a Credit-View Model
AbstractThe financial crisis and recession of 2008-2010 have witnessed the biggest reduction in money-supply multipliers in U.S. history. In contrast to what occurred during the Great Depression, the Fed has avoided decreases in monetary aggregates by dramatically increasing the monetary base. A variation of the Bernanke-Blinder credit-view model is shown to reveal that holding the money supply constant following an autonomous fall in the money multiplier is insufficient to prevent aggregate demand from falling. This helps to explain the severity of the 2008-2010 recession despite growing monetary aggregates and expansionary fiscal policy
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Bibliographic InfoPaper provided by University of Delaware, Department of Economics in its series Working Papers with number 10-05.
Length: 12 pages
Date of creation: 2010
Date of revision:
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Web page: http://www.lerner.udel.edu/departments/economics/department-economics/
More information through EDIRC
credit-view model; monetary policy; money-supply model;
Find related papers by JEL classification:
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
- E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-08-14 (All new papers)
- NEP-CBA-2010-08-14 (Central Banking)
- NEP-MAC-2010-08-14 (Macroeconomics)
- NEP-MON-2010-08-14 (Monetary Economics)
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