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Analysis of Monetary Policy and Financial Stability: A New Paradigm

  • Charles A. E. Goodhart
  • Carolina Osorio
  • Dimitrios P. Tsomocos

This paper introduces agent heterogeneity, liquidity, and endogenous default to a DSGE framework. Our model allows for a comprehensive assessment of regulatory and monetary policy, as well as welfare analysis in the different sectors of the economy. Due to liquidity and endogenous default, the transmission mechanism of shocks is well defined, and their short to medium run effects on financial stability are properly captured.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 2885.

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Date of creation: 2009
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Handle: RePEc:ces:ceswps:_2885
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  1. Buiter, Willem H., 1999. "The Fallacy of the Fiscal Theory of the Price Level," CEPR Discussion Papers 2205, C.E.P.R. Discussion Papers.
  2. Dimitrios P. Tsomocos, 2006. "Generic Determinacy and Money Non-Neutrality of International Monetary Equilibria," OFRC Working Papers Series 2006fe07, Oxford Financial Research Centre.
  3. Dimitrios P. Tsomocos, 2003. "Equilibrium Analysis, Banking and Financial Instability," OFRC Working Papers Series 2003fe08, Oxford Financial Research Centre.
  4. Bernanke, Ben S. & Gertler, Mark & Gilchrist, Simon, 1999. "The financial accelerator in a quantitative business cycle framework," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 21, pages 1341-1393 Elsevier.
  5. Matteo Iacoviello & Stefano Neri, 2007. "Housing Market Spillovers: Evidence from an Estimated DSGE Model," Boston College Working Papers in Economics 659, Boston College Department of Economics, revised 23 Oct 2009.
  6. Goodhart, C.A.E. & Sunirand, P. & Tsomocos, D.P., 2011. "The optimal monetary instrument for prudential purposes," Journal of Financial Stability, Elsevier, vol. 7(2), pages 70-77, June.
  7. Vasco Cúrdia & Michael Woodford, 2009. "Credit spreads and monetary policy," Staff Reports 385, Federal Reserve Bank of New York.
  8. Dimitrios P Tsomocos & Charles A.E. Goodhart, 2003. "A Model to Analyse Financial Fragility," Economics Series Working Papers 2003-FE-13, University of Oxford, Department of Economics.
  9. Goodhart, Charles A. E. & Sunirand, Pojanart & Tsomocos, Dimitrios P., 2004. "A model to analyse financial fragility: applications," Journal of Financial Stability, Elsevier, vol. 1(1), pages 1-30, September.
  10. Leao, Emanuel R. & Leao, Pedro R., 2007. "Modelling the central bank repo rate in a dynamic general equilibrium framework," Economic Modelling, Elsevier, vol. 24(4), pages 571-610, July.
  11. Frank Schorfheide, 2000. "Loss function-based evaluation of DSGE models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 15(6), pages 645-670.
  12. C.A.E. Goodhard & P. Sunirand, 2008. "The Optimal Monetary Instrument for Prudential Purposes," Economics Series Working Papers 2008fe26, University of Oxford, Department of Economics.
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