The balance sheet channel

We study the role of the balance sheet channel of monetary policy in an environment in which credit plays an important role in the funding of new capital investment. Specifically, we ask whether the transmission mechanism of monetary policy is altered in an environment in which financial intermediat...

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Autores principales: Cohen-Cole, Ethan, Martínez-García, Enrique
Formato: Artículo
Lenguaje:eng
Publicado: Banco Central de Chile 2019
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Acceso en línea:https://hdl.handle.net/20.500.12580/3764
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spelling oai-20.500.12580-37642021-04-24T11:04:11Z The balance sheet channel Cohen-Cole, Ethan Martínez-García, Enrique POLÍTICA MONETARIA We study the role of the balance sheet channel of monetary policy in an environment in which credit plays an important role in the funding of new capital investment. Specifically, we ask whether the transmission mechanism of monetary policy is altered in an environment in which financial intermediation with agency costs, aggregate risk on the performance of loans, and banking regulations are all features that can potentially amplify the impact of shocks over the cycle. Because monetary policy has empirically been asymmetric and marked by periods of pronounced action, our approach provides an alternative plausible mechanism that generates the necessary intuition to account for these patterns. Our model is consistent with current New Neoclassical Synthesis models in good times. In bad times (or crisis periods), when systemic losses are potentially large, the model can generate sharp changes in the external finance premium and, therefore, in the patterns of investment. 2019-11-01T00:04:57Z 2019-11-01T00:04:57Z 2010 Artículo 978-956-7421-34-3 https://hdl.handle.net/20.500.12580/3764 eng Series on Central Banking, Analysis, and Economic Policies, no. 15 Attribution-NonCommercial-NoDerivs 3.0 Chile http://creativecommons.org/licenses/by-nc-nd/3.0/cl/ .pdf Sección o Parte de un Documento p. 255-297 application/pdf Banco Central de Chile
institution Banco Central
collection Banco Central
language eng
topic POLÍTICA MONETARIA
spellingShingle POLÍTICA MONETARIA
Cohen-Cole, Ethan
Martínez-García, Enrique
The balance sheet channel
description We study the role of the balance sheet channel of monetary policy in an environment in which credit plays an important role in the funding of new capital investment. Specifically, we ask whether the transmission mechanism of monetary policy is altered in an environment in which financial intermediation with agency costs, aggregate risk on the performance of loans, and banking regulations are all features that can potentially amplify the impact of shocks over the cycle. Because monetary policy has empirically been asymmetric and marked by periods of pronounced action, our approach provides an alternative plausible mechanism that generates the necessary intuition to account for these patterns. Our model is consistent with current New Neoclassical Synthesis models in good times. In bad times (or crisis periods), when systemic losses are potentially large, the model can generate sharp changes in the external finance premium and, therefore, in the patterns of investment.
format Artículo
author Cohen-Cole, Ethan
Martínez-García, Enrique
author_facet Cohen-Cole, Ethan
Martínez-García, Enrique
author_sort Cohen-Cole, Ethan
title The balance sheet channel
title_short The balance sheet channel
title_full The balance sheet channel
title_fullStr The balance sheet channel
title_full_unstemmed The balance sheet channel
title_sort balance sheet channel
publisher Banco Central de Chile
publishDate 2019
url https://hdl.handle.net/20.500.12580/3764
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