Prices and Quantities in the Monetary Policy Transmission Mechanism
Central banks have a variety of tools for implementing monetary policy, but the tool that has received the most attention in the literature has been the overnight interest rate. The financial crisis that erupted in the summer of 2007 has refocused attention on other channels of monetary policy, notably the transmission of policy through the supply of credit and overall conditions in the capital markets. In 2008, the Federal Reserve put into place various lender-of-last-resort programs under section 13(3) of the Federal Reserve Act in order to cushion the strains on financial intermediaries’ balance sheets and thereby target the unusually wide spreads in a variety of credit markets. While classic monetary policy targets a price (for example, the federal funds rate), the liquidity facilities affect balance-sheet quantities. The financial crisis forcefully demonstrated that the collapse of the financial sector’s balance-sheet capacity can have powerful adverse effects on the real economy. We reexamine the distinctions between prices and quantities in monetary policy transmission.
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.:
- Claudio Borio & Haibin Zhu, 2008.
"Capital regulation, risk-taking and monetary policy: a missing link in the transmission mechanism?,"
BIS Working Papers
268, Bank for International Settlements.
- Borio, Claudio & Zhu, Haibin, 2012. "Capital regulation, risk-taking and monetary policy: A missing link in the transmission mechanism?," Journal of Financial Stability, Elsevier, vol. 8(4), pages 236-251.
- Hyun Song Shin & Erkko Etula & Tobias Adrian, 2010.
"Risk Appetite and Exchange Rates,"
2010 Meeting Papers
311, Society for Economic Dynamics.
- Adrian, Tobias & Etula, Erkko & Shin, Hyun Song, 2015. "Risk appetite and exchange rates," Staff Reports 750, Federal Reserve Bank of New York.
- Adrian, Tobias & Etula, Erkko & Shin, Hyun Song, 2009. "Risk appetite and exchange Rates," Staff Reports 361, Federal Reserve Bank of New York, revised 10 Dec 2015.
- Michael Woodford, 2005.
"Central bank communication and policy effectiveness,"
Proceedings - Economic Policy Symposium - Jackson Hole,
Federal Reserve Bank of Kansas City, issue Aug, pages 399-474.
- Michael Woodford, 2005. "Central Bank Communication and Policy Effectiveness," NBER Working Papers 11898, National Bureau of Economic Research, Inc.
- Hyun Song Shin & Emanuel Moench & Tobias Adrian, 2010.
"Financial Intermediation, Asset Prices, and Macroeconomic Dynamics,"
2010 Meeting Papers
297, Society for Economic Dynamics.
- Tobias Adrian & Emanuel Moench & Hyun Song Shin, 2010. "Financial intermediation, asset prices, and macroeconomic dynamics," Staff Reports 422, Federal Reserve Bank of New York.
When requesting a correction, please mention this item's handle: RePEc:ijc:ijcjou:y:2009:q:4:a:7. 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: (Timo Laurmaa)
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.