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Money and the Transmission of Monetary Policy

Author

Listed:
  • Seth Carpenter

    () (Board of Governors of the Federal Reserve System)

  • Selva Demiralp

Abstract

The transmission mechanism of monetary policy has received extensive treatment in the macroeconomic literature. Most models currently used for macroeconomic analysis exclude money or else model money demand as entirely endogenous. Nevertheless, academic research and many textbooks continue to use the money multiplier concept in discussions of money. We explore the institutional structure of the transmission mechanism beginning with open market operations through to money and loans to document that the mechanism does not work through the standard multiplier model or the bank lending channel. Our analysis, however, does not reflect on the existence of a broader credit channel

Suggested Citation

  • Seth Carpenter & Selva Demiralp, 2009. "Money and the Transmission of Monetary Policy," Koç University-TUSIAD Economic Research Forum Working Papers 0906, Koc University-TUSIAD Economic Research Forum.
  • Handle: RePEc:koc:wpaper:0906
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    File URL: http://eaf.ku.edu.tr/sites/eaf.ku.edu.tr/files/erf_wp_0906.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Monetary transmission mechanism; money multiplier; lending channel;

    JEL classification:

    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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