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Monetary Policy in a Channel System

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Author Info
Aleksander Berentsen
Cyril Monet

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Abstract

This paper studies the theoretical properties of a channel system of interestrate control in a dynamic general equilibrium model. Agents are subject to liquidity shocks which can be partially insured in a secured money market, or at a standing facility operated by the central bank. We show that it is optimal to have a strictly positive interest rate corridor and that a shift of the corridor affects the money market rate one for one. Moreover, the central bank can tighten its policy without changing its policy rate by simply increasing the corridor symmetrically around the policy rate.

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Paper provided by Institute for Empirical Research in Economics - IEW in its series IEW - Working Papers with number iewwp295.

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Date of creation: Jul 2006
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Handle: RePEc:zur:iewwpx:295

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Related research
Keywords: Monetary Policy; Interest Rates; Search;

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Find related papers by JEL classification:
E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information

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References listed on IDEAS
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.:
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    Other versions:
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    Other versions:
  5. Shouyong Shi, 1997. "A Divisible Search Model of Fiat Money," Econometrica, Econometric Society, vol. 65(1), pages 75-102, January.
    Other versions:
  6. Wallace, Neil, 2001. "Whither Monetary Economics?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(4), pages 847-69, November.
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  16. Neil Wallace, 2005. "From Private Banking To Central Banking: Ingredients Of A Welfare Analysis," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 46(2), pages 619-631, 05. [Downloadable!] (restricted)
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  18. Benjamin M. Friedman, 1999. "The Future of Monetary Policy: The Central Bank as an Army With Only a Signal Corps," NBER Working Papers 7420, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  20. Michele Manna & Philipp Hartmann & Andres Manzanares, 2001. "The microstructure of the Euro money market," Working Paper Series 080, European Central Bank. [Downloadable!]
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  21. Ricardo Lagos, 2005. "Asset Prices and Liquidity in an Exchange Economy," 2005 Meeting Papers 143, Society for Economic Dynamics.
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  25. Ricardo Lagos & Guillaume Rocheteau, 2004. "Money and capital as competing media of exchange," Staff Report 341, Federal Reserve Bank of Minneapolis. [Downloadable!]
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    Other versions:
Full references

Cited by:
(explanations, 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.)

  1. Jonathan Chiu & Alexandra Lai, 2007. "Modelling Payments Systems: A Review of the Literature," Working Papers 07-28, Bank of Canada. [Downloadable!]
  2. Antoine Martin & Cyril Monnet, 2008. "Monetary policy implementation frameworks: a comparative analysis," Staff Reports 313, Federal Reserve Bank of New York. [Downloadable!]
  3. Huberto M. Ennis & John A. Weinberg, 2007. "Interest on reserves and daylight credit," Economic Quarterly, Federal Reserve Bank of Richmond, issue Spr, pages 111-142. [Downloadable!]
  4. Allen Head & Junfeng Qiu, 2007. "Elastic Money, Inflation, and Interest Rate Policy," Working Papers 1152, Queen's University, Department of Economics. [Downloadable!]
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