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Financial Intermediation and Monetary Policies in the World Economy

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  • Grilli, Vittorio
  • Roubini, Nouriel

Abstract

In this paper we investigate the role of credit institutions in transmitting monetary shocks to the domestic economy and to the output of the rest of the world. In modelling the monetary and financial sector of the economy we distinguish between monetary injections that take place via lump-sum transfers to individuals and those that involve increased credit to the commercial banking sector through discount window operations. We distinguish between the discount rate of the central bank and the lending and borrowing interest rates of commercial banks, which we assume are also subject to reserve requirements. We find that domestic output increases after a steady state increase in monetary injections via increases in domestic credit, but an increase in the steady state level of monetary transfers reduces the level of output.

Suggested Citation

  • Grilli, Vittorio & Roubini, Nouriel, 1991. "Financial Intermediation and Monetary Policies in the World Economy," CEPR Discussion Papers 566, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:566
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    Cited by:

    1. Grilli, Vittorio & Roubini, Nouriel, 1996. "Liquidity models in open economies: Theory and empirical evidence," European Economic Review, Elsevier, vol. 40(3-5), pages 847-859, April.
    2. Demid Golikov, 2005. "Financial Intermediary In Monetary Economics: An Excerpt," Macroeconomics 0510018, University Library of Munich, Germany.
    3. Kim, Soyoung, 2001. "International transmission of U.S. monetary policy shocks: Evidence from VAR's," Journal of Monetary Economics, Elsevier, vol. 48(2), pages 339-372, October.
    4. Kumah, F.Y., 1996. "The Effect of Monetary Policy on Exchange Rates : How to Solve the Puzzles," Discussion Paper 1996-70, Tilburg University, Center for Economic Research.
    5. Kumah, F.Y., 1996. "The Effect of Monetary Policy on Exchange Rates : How to Solve the Puzzles," Other publications TiSEM bd740a88-6e13-4285-bd5b-b, Tilburg University, School of Economics and Management.
    6. Kim, Soyoung & Roubini, Nouriel, 2000. "Exchange rate anomalies in the industrial countries: A solution with a structural VAR approach," Journal of Monetary Economics, Elsevier, vol. 45(3), pages 561-586, June.

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