IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this book chapter

Conventional and Unconventional Monetary Policy with Endogenous Collateral Constraints

In: Lessons from the Financial Crisis for Monetary Policy

Listed author(s):
  • Aloísio Araújo
  • Susan Schommer
  • Michael Woodford

We consider the effects of central bank purchases of a risky asset as an additional dimension of policy alongside "conventional" interest rate policy in a general-equilibrium model of asset pricing with endogenous collateral constraints. The effects of asset purchases depend on the way that they affect collateral constraints. We show that under some circumstances, central bank purchases relax financial constraints, increase aggregate demand, and may even achieve a Pareto improvement; but in other cases, they tighten financial constraints, reduce aggregate demand, and lower welfare. The latter case is almost certainly the one that arises if central bank purchases are sufficiently large. (JEL D51, E43, E44, E52, E58)

(This abstract was borrowed from another version of this item.)

To our knowledge, this item is not available for download. To find whether it is available, there are three options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.

as
in new window

This chapter was published in:
  • Mark Gertler, 2015. "Lessons from the Financial Crisis for Monetary Policy," NBER Books, National Bureau of Economic Research, Inc, number gert13-1.
  • This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 13305.
    Handle: RePEc:nbr:nberch:13305
    Contact details of provider: Postal:
    National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.

    Phone: 617-868-3900
    Web page: http://www.nber.org
    Email:


    More information through EDIRC

    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.:

    as
    in new window


    1. Aloisio Araújo & Jaime Orrillo & Mario R. Páscoa, 2000. "Equilibrium with Default and Endogenous Collateral," Mathematical Finance, Wiley Blackwell, vol. 10(1), pages 1-21.
    2. Aloisio Araujo & Mário Rui Páscoa & Juan Pablo Torres-Martínez, 2002. "Collateral Avoids Ponzi Schemes in Incomplete Markets," Econometrica, Econometric Society, vol. 70(4), pages 1613-1638, July.
    3. Cúrdia, Vasco & Woodford, Michael, 2011. "The central-bank balance sheet as an instrument of monetarypolicy," Journal of Monetary Economics, Elsevier, vol. 58(1), pages 54-79, January.
    4. Araújo, Aloísio & Kubler, Felix & Schommer, Susan, 2012. "Regulating collateral-requirements when markets are incomplete," Journal of Economic Theory, Elsevier, vol. 147(2), pages 450-476.
    5. Wallace, Neil, 1981. "A Modigliani-Miller Theorem for Open-Market Operations," American Economic Review, American Economic Association, vol. 71(3), pages 267-274, June.
    6. Markus K. Brunnermeier, 2009. "Deciphering the Liquidity and Credit Crunch 2007-2008," Journal of Economic Perspectives, American Economic Association, vol. 23(1), pages 77-100, Winter.
    7. Gorton, Gary & Metrick, Andrew, 2012. "Securitized banking and the run on repo," Journal of Financial Economics, Elsevier, vol. 104(3), pages 425-451.
    8. David Bowman & Etienne Gagnon & Michael P. Leahy, 2010. "Interest on excess reserves as a monetary policy instrument: the experience of foreign central banks," International Finance Discussion Papers 996, Board of Governors of the Federal Reserve System (U.S.).
    Full references (including those not matched with items on IDEAS)

    This item is featured on the following reading lists or Wikipedia pages:

    1. Conventional and Unconventional Monetary Policy with Endogenous Collateral Constraints (AEJ:MA 2015) in ReplicationWiki

    When requesting a correction, please mention this item's handle: RePEc:nbr:nberch:13305. 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: ()

    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.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.