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Collateralized Assets Prices and Monetary Policy

Author

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  • Mauricio Arango

Abstract

A well-informed and cautious financial system can improve the welfare outcome of an economy by making lenders surplus to borrowers. Nevertheless, in a crisis, the behavior of the financial system can become an amplifier of it, given that credit approval conditions rarely meet the standards. Therefore, a credit crunch may occur even in a low-interest rates environment. This paper illustrates the aforementioned point by developing a general equilibrium model where the collateral credit condition defines the prudential behavior of the financial system. It and other conditions amplify the magnitude of a negative productivity shock.

Suggested Citation

  • Mauricio Arango, 2019. "Collateralized Assets Prices and Monetary Policy," Revista de Economía del Rosario, Universidad del Rosario, vol. 22(2), pages 155-185, December.
    • Handle: RePEc:col:000151:017984
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    File URL: https://revistas.urosario.edu.co/index.php/economia/article/view/8116
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    More about this item

    Keywords

    Monetary policy; credit; collateralized assets; general equilibrium;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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