Monetary Policy in a Channel System
University of Basel - Economics Department; CESifo (Center for Economic Studies and Ifo Institute)
European Central Bank (ECB) - Directorate General Research
May 6, 2008
CESifo Working Paper Series No. 1929
FRB of Philadelphia Working Paper No. 08-7
University of Zurich, Institute for Empirical Research in Economics Working Paper No. 295
Channel systems for conducting monetary policy are becoming increasingly popular. Despite its popularity, the consequences of implementing policy with a channel system are not well understood. The authors develop a general equilibrium framework of a channel system and study the optimal policy. A novel aspect of the channel system is that a central bank can "tighten" or "loosen" its policy without changing its policy rate. This policy instrument has so far been overlooked by a large body of the literature on the optimal design of interest-rate rules.
Number of Pages in PDF File: 43
Keywords: Monetary Policy, Interest Rates, Search
JEL Classification: E40, E50, D83
Date posted: August 4, 2006
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