The Use of Credit Ceilings in the Presence of Indirect Monetary Instruments An Analytical Framework

17 Pages Posted: 14 Feb 2006

See all articles by Plamen Yossifov

Plamen Yossifov

International Monetary Fund (IMF)

Date Written: December 2002

Abstract

In this paper, we introduce credit ceilings in the standard model of the money multiplier and analyze their role in central bank`s management of money supply in the presence of indirect monetary instruments. We show that under a regime of total credit ceilings, their optimal value equals the desired growth rate of the adjusted monetary base. Under a regime of partial credit ceilings, their optimal value depends on the desired growth rate of the adjusted monetary base, the degree of substitutability between the regulated and unregulated types of banks' earning assets, and the autonomous growth rate of the latter.

Keywords: credit ceilings, selective credit controls

JEL Classification: E51, E52

Suggested Citation

Yossifov, Plamen, The Use of Credit Ceilings in the Presence of Indirect Monetary Instruments An Analytical Framework (December 2002). IMF Working Paper No. 02/206, Available at SSRN: https://ssrn.com/abstract=880860

Plamen Yossifov (Contact Author)

International Monetary Fund (IMF)

700 19th Street NW
Washington, DC 20431
United States

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