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Monetary policy in a channel system

  • Berentsen, Aleksander
  • Monnet, Cyril

Channel systems for conducting monetary policy are becoming increasingly popular. Despite its popularity, the consequences of implementing policy with a channel system are not well understood. We develop a general equilibrium framework of a channel system and study the optimal policy. A novel aspect of the channel system is that a central bank can "tighten" or "loosen" its policy without changing its policy rate. This policy instrument has so far been overlooked by a large body of the literature on the optimal design of interest-rate rules.

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Article provided by Elsevier in its journal Journal of Monetary Economics.

Volume (Year): 55 (2008)
Issue (Month): 6 (September)
Pages: 1067-1080

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Handle: RePEc:eee:moneco:v:55:y:2008:i:6:p:1067-1080
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505566

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