Conventional and Unconventional Monetary Policy
We extend a standard New Keynesian model to incorporate heterogeneity in spending opportunities and two sources of (potentially time-varying) credit spreads, and to allow a role for the central bank's balance sheet in equilibrium determination. We use the model to investigate the implications of imperfect financial intermediation for familiar monetary policy prescriptions, and to consider additional dimensions of central-bank policy --- variations in the size and composition of the central bank's balance sheet, and payment of interest on reserves --- alongside the traditional question of the proper choice of an operating target for an overnight policy rate. We also give particular attention to the special problems that arise when the zero lower bound for the policy rate is reached. We show that it is possible to provide criteria for the choice of policy along each of these possible dimensions, within a single unified framework, and to provide policy prescriptions that apply equally when financial markets work efficiently and when they are subject to substantial disruptions, and equally when the zero bound is reached and when it is not a concern.
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- Rajnish Mehra & Edwarad C Prescott & Facundo Piguillem, 2007.
"Intermediated Quantities and Returns,"
122247000000001580, UCLA Department of Economics.
- Rajnish Mehra & Facundo Piguillem & Edward C. Prescott, 2007. "Intermediated quantities and returns," Working Papers 655, Federal Reserve Bank of Minneapolis.
- Rajnish Mehra & Facundo Piguillem & Edward C. Prescott, 2008. "Intermediated quantities and returns," Staff Report 405, Federal Reserve Bank of Minneapolis.
- Gertler, Mark & Karadi, Peter, 2011. "A model of unconventional monetary policy," Journal of Monetary Economics, Elsevier, vol. 58(1), pages 17-34, January.
- Michael Woodford, 2007.
"Forecast Targeting as a Monetary Policy Strategy: Policy Rules in Practice,"
NBER Working Papers
13716, National Bureau of Economic Research, Inc.
- Michael Woodford, 2012. "Forecast Targeting as a Monetary Policy Strategy - Policy Rules in Practice," Book Chapters, in: Evan F. Koenig & Robert Leeson & George A. Kahn (ed.), The Taylor Rule and the Transformation of Monetary Policy, chapter 9 Hoover Institution, Stanford University.
- Pierpaolo Benigno & Michael Woodford, 2004.
"Inflation Stabilization and Welfare: The Case of a Distorted Steady State,"
NBER Working Papers
10838, National Bureau of Economic Research, Inc.
- Pierpaolo Benigno & Michael Woodford, 2005. "Inflation Stabilization And Welfare: The Case Of A Distorted Steady State," Journal of the European Economic Association, MIT Press, vol. 3(6), pages 1185-1236, December.
- Michael Woodford & Pierpaolo Benigno, 2004. "Inflation Stabilization and Welfare: The Case of a Distorted Steady State," 2004 Meeting Papers 481, Society for Economic Dynamics.
- Rajnish Mehra & Facundo Piguillem & Edward C. Prescott, 2011.
"Costly financial intermediation in neoclassical growth theory,"
685, Federal Reserve Bank of Minneapolis.
- Rajnish Mehra & Facundo Piguillem & Edward C. Prescott, 2011. "Costly financial intermediation in neoclassical growth theory," Quantitative Economics, Econometric Society, vol. 2(1), pages 1-36, 03.
- Rajnish Mehra & Facundo Piguillem & Edward C. Prescott, 2008. "Costly Financial Intermediation in Neoclassical Growth Theory," NBER Working Papers 14351, National Bureau of Economic Research, Inc.
- Vasco Cúrdia & Michael Woodford, 2009.
"Credit spreads and monetary policy,"
385, Federal Reserve Bank of New York.
- Vasco Curdia & Michael Woodford, 2008. "Credit Frictions and Optimal Monetary Policy," Discussion Papers 0809-02, Columbia University, Department of Economics.
- M. H. Khalil Timamy, 2005. "Debate," Review of African Political Economy, Taylor & Francis Journals, vol. 32(104-105), pages 383-393, June.
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