Gross Substitutability of Financial Assets: Effects on Monetary Policy
This paper seeks to discuss the relevance of the gross substitutability assumption in the assessment of the sustainability of the sterilization policy. In this line, different cases are proposed with the purpose of characterizing certain results in terms of financial cost and effectiveness of such policy. The sterilization policy is one of the key elements in the so-called "managed floating strategy" onetary regimes (Bonfinger y Wollmershäuser, 2003), and its success depends critically on the gross substitutability of financial assets assumption. This paper takes a partial equilibrium approach in order to capture the idea of how the non-financial private sector substitutes financial assets, and studies the implications (for monetary policy) of different scenarios in terms of the parametric configuration of assets demands. The main results show that the ability of the monetary authority to modify the balance sheet of the non-financial private sector depends critically on the parametric configuration of assets demands. And this parametric configuration is explained by the agents´ risk aversion and the expected returns variance-covariance matrix. This paper also includes a simple empirical exercise of the latter result.
Volume (Year): 1 (2010)
Issue (Month): 60 (October - December)
|Contact details of provider:|| Postal: Reconquista 266 - C1003ABF - Buenos Aires|
Phone: (54-11) 4348-3582
Fax: (54-11) 4348-3794
Web page: http://www.bcra.gov.ar
More information through EDIRC
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.:
- Roberto Frenkel & Martin Rapetti, 2008. "Five years of competitive and stable real exchange rate in Argentina, 2002-2007," International Review of Applied Economics, Taylor & Francis Journals, vol. 22(2), pages 215-226.
- Frederic S. Mishkin, 2009.
"Monetary Policy Strategy,"
MIT Press Books,
The MIT Press,
edition 1, volume 1, number 0262513374.
- De Grauwe, Paul & Polan, Magdalena, 2001.
"Is Inflation Always and Everywhere a Monetary Phenomenon?,"
CEPR Discussion Papers
2841, C.E.P.R. Discussion Papers.
- Paul De Grauwe & Magdalena Polan, 2005. "Is Inflation Always and Everywhere a Monetary Phenomenon?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 107(2), pages 239-259, 06.
- Paul De Grauwe & Magdalena Polan, 2001. "Is Inflation Always and Everywhere a Monetary Phenomenon?," International Economics Working Papers Series wpie009, Katholieke Universiteit Leuven, Centrum voor Economische Studiën, International Economics.
- Frederic S. Mishkin, 1996. "The Channels of Monetary Transmission: Lessons for Monetary Policy," NBER Working Papers 5464, National Bureau of Economic Research, Inc.
- Tobin, James, 1982.
"Money and Finance in the Macroeconomic Process,"
Journal of Money, Credit and Banking,
Blackwell Publishing, vol. 14(2), pages 171-204, May.
- James Tobin, 1982. "Money and Finance in the Macro-Economic Process," Cowles Foundation Discussion Papers 613R, Cowles Foundation for Research in Economics, Yale University.
- Tobin, James, 1981. "Money and Finance in the Macro-Economic Process," Nobel Prize in Economics documents 1981-1, Nobel Prize Committee.
- Tobin, James, 1970. "Deposit Interest Ceilings as a Monetary Control," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 2(1), pages 4-14, February.
- Santomero, Anthony M & Siegel, Jeremy J, 1981. "Bank Regulation and Macro-Economic Stability," American Economic Review, American Economic Association, vol. 71(1), pages 39-53, March.
- Dornbusch, Rudiger, 1976. "Expectations and Exchange Rate Dynamics," Journal of Political Economy, University of Chicago Press, vol. 84(6), pages 1161-1176, December.
- Frederic S. Mishkin, 2007.
"Will Monetary Policy Become More of a Science?,"
NBER Working Papers
13566, National Bureau of Economic Research, Inc.
- Tobin, James, 1969. "A General Equilibrium Approach to Monetary Theory," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 1(1), pages 15-29, February.
- Roberto Frenkel, 2006. "An alternative to inflation targeting in Latin America: macroeconomic policies focused on employment," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 28(4), pages 573-591, July.
When requesting a correction, please mention this item's handle: RePEc:bcr:ensayo:v:1:y:2010:i:60:p:105-136. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Federico Grillo)
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.