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Monetary Policy in a Channel System

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

43 Pages Posted: 4 Aug 2006  

Aleksander Berentsen

University of Basel - Economics Department; CESifo (Center for Economic Studies and Ifo Institute)

Cyril Monet

European Central Bank (ECB) - Directorate General Research

Date Written: May 6, 2008

Abstract

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.

Keywords: Monetary Policy, Interest Rates, Search

JEL Classification: E40, E50, D83

Suggested Citation

Berentsen, Aleksander and Monet, Cyril, Monetary Policy in a Channel System (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. Available at SSRN: https://ssrn.com/abstract=921809

Aleksander Berentsen (Contact Author)

University of Basel - Economics Department ( email )

Petersgraben 51
Basel, CH-4003
Switzerland

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Cyril Monet

European Central Bank (ECB) - Directorate General Research

Kaiserstrasse 29
D-60311 Frankfurt am Main
Germany

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