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Monetary Policy with Heterogeneous Collateralized Borrowing

  • José Suárez-Lledó

Secured debt has become a predominant form of credit. The purpose of this paper is to analyze collateral in a model of money and its interaction with monetary policy. Borrowing capacity, and ultimately consumption, is linked to the value of the asset that serves as collateral, specific to each agent. The valuation of this asset will reflect its liquidity as a collateralizable asset in contingencies. The Friedman rule is the optimal policy. For any other policy credit and the use collateral improves welfare. The Mundell-Tobin effect is not present in this model. The framework developed in this paper is highly suitable for the study of markets of asset-backed securities.

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File URL: http://research.barcelonagse.eu/tmp/working_papers/374.pdf
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Paper provided by Barcelona Graduate School of Economics in its series Working Papers with number 374.

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Date of creation: Jan 2009
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Handle: RePEc:bge:wpaper:374
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  1. Aleksander Berentsen & Cyril Monnet, 2007. "Monetary Policy in a Channel System," CESifo Working Paper Series 1929, CESifo Group Munich.
  2. Athanasios Geromichalos & Juan M Licari & Jose Suarez-Lledo, 2007. "Monetary Policy and Asset Prices," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 10(4), pages 761-779, October.
  3. Guillaume Rocheteau & Randall Wright, 2004. "Money in search equilibrium, in competitive equilibrium, and in competitive search equilibrium," Working Paper 0405, Federal Reserve Bank of Cleveland.
  4. Ben S. Bernanke & Mark Gertler, 1995. "Inside the Black Box: The Credit Channel of Monetary Policy Transmission," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 27-48, Fall.
  5. Aleksander Berentsen & Guillaume Rocheteau & Shouyong Shi, 2002. "Friedman Meets Hosios: Efficiency in Search Models of Money," Working Papers shouyong-02-04, University of Toronto, Department of Economics.
  6. Makoto Watanabe & Leo Ferraris, 2007. "Collateral Secured Loans in a Monetary Economy," 2007 Meeting Papers 121, Society for Economic Dynamics.
  7. Matteo Iacoviello, 2002. "House prices, borrowing constraints and monetary policy in the business cycle," Boston College Working Papers in Economics 542, Boston College Department of Economics, revised 06 Dec 2004.
  8. Aleksander Berentsen & Christopher Waller, 2005. "Optimal Stabilization Policy with Flexible Prices," CESifo Working Paper Series 1638, CESifo Group Munich.
  9. Tommaso Monacelli, 2008. "Optimal Monetary Policy with Collateralized Household Debt and Borrowing Constraints," NBER Chapters, in: Asset Prices and Monetary Policy, pages 103-146 National Bureau of Economic Research, Inc.
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