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Monetary Policy With Investment–Saving Imbalances

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  • Roberto Tamborini

Abstract

Financial instability is the new challenge for monetary policy. Most studies indicate that financial crises follow prolonged unwinding of investment–saving imbalances (ISI). These phenomena are not contemplated by the standard theoretical framework of continuous intertemporal equilibrium. This paper's aim is to take a first step into the analysis of monetary policy in the context of ISI. First, a dynamic model of a flex‐price, competitive economy is presented where ISI are allowed to develop. Second, upon introducing different types of Taylor rules, some indications for the conduct of monetary policy emerge, which are at variance with the standard view.

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  • Roberto Tamborini, 2010. "Monetary Policy With Investment–Saving Imbalances," Metroeconomica, Wiley Blackwell, vol. 61(3), pages 473-509, July.
    • Handle: RePEc:bla:metroe:v:61:y:2010:i:3:p:473-509
    DOI: 10.1111/j.1467-999X.2009.04078.x
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    2. Ronny Mazzocchi, 2013. "Scope and Flaws of the New Neoclassical Synthesis," DEM Discussion Papers 2013/13, Department of Economics and Management.
    3. Isabel Almudi & Francisco Fatas-Villafranca & Gloria Jarne & Julio Sanchez-Choliz, 2017. "Rethinking Macroeconomic Policy within a Simple Dynamic Model," Metroeconomica, Wiley Blackwell, vol. 68(3), pages 425-464, July.
    4. Yılmaz, Engin & Süslü, Bora, 2015. "The Relation between Money, Interest and Consumption in Developing Countries: The Case of Turkey," MPRA Paper 68614, University Library of Munich, Germany.
    5. Ronny Mazzocchi, 2013. "Intertemporal Coordination Failure and Monetary Policy," DEM Discussion Papers 2013/15, Department of Economics and Management.
    6. Ronny Mazzocchi, 2013. "Investment-Saving Imbalances with Endogenous Capital Stock," DEM Discussion Papers 2013/14, Department of Economics and Management.
    7. Brancaccio, Emiliano & Califano, Andrea & Lopreite, Milena & Moneta, Alessio, 2020. "Nonperforming loans and competing rules of monetary policy: A statistical identification approach," Structural Change and Economic Dynamics, Elsevier, vol. 53(C), pages 127-136.
    8. Ronny Mazzocchi, 2013. "Monetary Policy when the NAIRI is unknown: The Fed and the Great Deviation," DEM Discussion Papers 2013/16, Department of Economics and Management.

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