Central Bank Lending and Inflation
AbstractCentral banks have responded to the current financial crisis with an unprecendented program of lending to banks and other financial institutions. In some cases, this lending has lead to a substantial increase in the monetary base. Can such lending programs cause an increase in inflation? Is so, under what circumstances? I investigate these questions in a dynamic general equilibrium model with overlapping generations of agents. The model illustrates how unsterilized central bank loans of currency can improve welfare during a liquidity crisis. It also shows, however, how such lending can introduce less-desirable equilibria with higher inflation rates. Other forms of lending, including sterilized loans using central bank bonds, can capture the same benefits without introducing the higher-inflation equilibria.
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.
Bibliographic InfoPaper provided by Society for Economic Dynamics in its series 2009 Meeting Papers with number 782.
Date of creation: 2009
Date of revision:
Contact details of provider:
Postal: Society for Economic Dynamics Christian Zimmermann Economic Research Federal Reserve Bank of St. Louis PO Box 442 St. Louis MO 63166-0442 USA
Web page: http://www.EconomicDynamics.org/society.htm
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Bruce Champ & Bruce D. Smith & Stephen D. Williamson, 1996.
"Currency Elasticity and Banking Panics: Theory and Evidence,"
Canadian Journal of Economics,
Canadian Economics Association, vol. 29(4), pages 828-64, November.
- Champ, B. & Snith, B.D. & Williamson, D.S., 1991. "Currency Elasticity and Banking Panics: Theory and Evidence," RCER Working Papers 292, University of Rochester - Center for Economic Research (RCER).
- Champ, B. & Smith, B.D., 1991. "Currency Elasticity and Banking Panics: theory and Evidence," University of Western Ontario, The Centre for the Study of International Economic Relations Working Papers 9109, University of Western Ontario, The Centre for the Study of International Economic Relations.
- Gaetano Antinolfi & Elisabeth Huybens, 2000.
"Monetary Stability and Liquidity Crises: The Role of the Lender of Last Resort,"
Econometric Society World Congress 2000 Contributed Papers
1156, Econometric Society.
- Antinolfi, Gaetano & Huybens, Elisabeth & Keister, Todd, 2001. "Monetary Stability and Liquidity Crises: The Role of the Lender of Last Resort," Journal of Economic Theory, Elsevier, vol. 99(1-2), pages 187-219, July.
- Gaetano Antinolfi & Elisabeth Huybens & Todd Keister, 2000. "Monetary Stability and Liquidity Crises: The Role of the Lender of Last Resort," Working Papers 0001, Centro de Investigacion Economica, ITAM.
- Antinolfi, Gaetano & Keister, Todd, 2006.
"Discount Window Policy, Banking Crises, And Indeterminacy Of Equilibrium,"
Cambridge University Press, vol. 10(01), pages 1-19, February.
- Gaetano Antinolfi & Todd Keister, 2003. "Discount Window Policy, Banking Crises, and Indeterminacy of Equilibrium," Working Papers 0305, Centro de Investigacion Economica, ITAM.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christian Zimmermann).
If references are entirely missing, you can add them using this form.