IDEAS home Printed from https://ideas.repec.org/p/ags/motuwp/293010.html
   My bibliography  Save this paper

Asymmetric Information, Financial Intermediation and the Monetary Transmission Mechanism: A Critical Review

Author

Listed:
  • Claus, Iris
  • Grimes, Arthur

Abstract

Macroeconomic models currently used by policy makers generally assume that the workings of financial markets can be fully summarised by financial prices, because the Modigliani and Miller (1958) theorem holds. This paper argues that these models are too limited in describing how monetary policy (and other) shocks are transmitted to the economy and points to new directions. The models are too limited because they disregard an information asymmetry between borrowers and lenders and the importance of financial intermediaries not only for individual depositors but the economy as a whole. Incorporating financial market interactions into macroeconomic models will enhance the understanding of the transmission mechanisms of monetary policy and other shocks.

Suggested Citation

  • Claus, Iris & Grimes, Arthur, 2003. "Asymmetric Information, Financial Intermediation and the Monetary Transmission Mechanism: A Critical Review," Motu Working Papers 293010, Motu Economic and Public Policy Research.
    • Handle: RePEc:ags:motuwp:293010
    DOI: 10.22004/ag.econ.293010
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/293010/files/Asymmetric-Information-Financial-Intermediation-and-the-Monetary-Transmission-Mechanism-A-Critical-Review.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.22004/ag.econ.293010?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    More about this item

    Keywords

    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:motuwp:293010. See general information about how to correct material in RePEc.

    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.

    We have no bibliographic references for this item. You can help adding them by using 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: AgEcon Search (email available below). General contact details of provider: https://edirc.repec.org/data/motuenz.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.