Monetary Policy in a Channel System
University of Zurich, Institute for Empirical Research in Economics Working Paper No. 295
43 Pages Posted: 4 Aug 2006
Date Written: May 6, 2008
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: Suggested Citation