Conventional and unconventional monetary policy
The authors extend a standard New Keynesian model to incorporate heterogeneity in spending opportunities and two sources of (potentially time-varying) credit spreads and to allow a role for the central bank's balance sheet in equilibrium determination. They use the model to investigate the implications of imperfect financial intermediation for familiar monetary policy prescriptions, and to consider additional dimensions of central bank policy - variations in the size and composition of the central bank's balance sheet and payment of interest on reserves - alongside the traditional question of the proper choice of setting an operating target for an overnight policy rate. The authors also give particular attention to the special problems that arise when the policy rate reaches the zero lower bound. They show that it is possible within a single unified framework to identify the criteria for policy to be optimal along each dimension. The suggested policy prescriptions apply equally well when financial markets work efficiently as when they are substantially disrupted and interest rate policy is constrained by the zero lower bound.
Volume (Year): (2010)
Issue (Month): May ()
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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.:
- Michael Woodford, 2012.
"Forecast Targeting as a Monetary Policy Strategy - Policy Rules in Practice,"
in: Evan F. Koenig & Robert Leeson & George A. Kahn (ed.), The Taylor Rule and the Transformation of Monetary Policy, chapter 9
Hoover Institution, Stanford University.
- Michael Woodford, 2007. "Forecast Targeting as a Monetary Policy Strategy: Policy Rules in Practice," NBER Working Papers 13716, National Bureau of Economic Research, Inc.
- Rajnish Mehra & Facundo Piguillem & Edward C. Prescott, 2011.
"Costly financial intermediation in neoclassical growth theory,"
Econometric Society, vol. 2(1), pages 1-36, 03.
- Rajnish Mehra & Facundo Piguillem & Edward C. Prescott, 2008. "Costly Financial Intermediation in Neoclassical Growth Theory," NBER Working Papers 14351, National Bureau of Economic Research, Inc.
- Rajnish Mehra & Facundo Piguillem & Edward C. Prescott, 2011. "Costly financial intermediation in neoclassical growth theory," Working Papers 685, Federal Reserve Bank of Minneapolis.
- repec:clu:wpaper:0809-02 is not listed on IDEAS
- Rajnish Mehra & Edwarad C Prescott & Facundo Piguillem, 2007.
"Intermediated Quantities and Returns,"
122247000000001580, UCLA Department of Economics.
- Rajnish Mehra & Facundo Piguillem & Edward C. Prescott, 2007. "Intermediated quantities and returns," Working Papers 655, Federal Reserve Bank of Minneapolis.
- Rajnish Mehra & Facundo Piguillem & Edward C. Prescott, 2008. "Intermediated quantities and returns," Staff Report 405, Federal Reserve Bank of Minneapolis.
- Pierpaolo Benigno & Michael Woodford, 2004.
"Inflation Stabilization and Welfare: The Case of a Distorted Steady State,"
NBER Working Papers
10838, National Bureau of Economic Research, Inc.
- Pierpaolo Benigno & Michael Woodford, 2005. "Inflation Stabilization And Welfare: The Case Of A Distorted Steady State," Journal of the European Economic Association, MIT Press, vol. 3(6), pages 1185-1236, December.
- Michael Woodford & Pierpaolo Benigno, 2004. "Inflation Stabilization and Welfare: The Case of a Distorted Steady State," 2004 Meeting Papers 481, Society for Economic Dynamics.
- Vasco Cúrdia & Michael Woodford, 2009.
"Credit spreads and monetary policy,"
385, Federal Reserve Bank of New York.
- Vasco Cúrdia & Michael Woodford, 2009.
"Credit frictions and optimal monetary policy,"
BIS Working Papers
278, Bank for International Settlements.
- M. H. Khalil Timamy, 2005. "Debate," Review of African Political Economy, Taylor & Francis Journals, vol. 32(104-105), pages 383-393, June.
- Gertler, Mark & Karadi, Peter, 2011. "A model of unconventional monetary policy," Journal of Monetary Economics, Elsevier, vol. 58(1), pages 17-34, January.
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