(Un)anticipated monetary policy in a DSGE model with a shadow banking system

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Title: (Un)anticipated monetary policy in a DSGE model with a shadow banking system
ISBN: 978-952-6699-04-2
Author: Verona, Fabio ; Martins, Manuel M. F. ; Drumond, Inês
Organization: Bank of Finland
Series: Bank of Finland Research Discussion Papers
ISSN: 1456-6184
Series year: 2013
Series number: 4/2013
Year of publication: 2013
Publication date: 11.4.2013
Published in: Published in International Journal of Central Banking, Volume 9, Number 3, September 2013, Pages 73-117
Pages: 43 s.
Keywords: rahapolitiikka; mallit; pankkitoiminta; korot; suhdanteet; joukkovelkakirjat; USA; odotukset; DSGE
JEL: E32; E44; E52; G24
Abstract: Motivated by the U.S. events of the 2000s, we address whether a too low for too long interest rate policy may generate a boom-bust cycle. We simulate anticipated and unanticipated monetary policies in state-of-the-art DSGE models and in a model with bond financing via a shadow banking system, in which the bond spread is calibrated for normal and optimistic times. Our results suggest that the U.S. boom-bust was caused by the combination of (i) interest rates that were too low for too long, (ii) excessive optimism and (iii) a failure of agents to anticipate the extent of the abnormally favourable conditions. Keywords: DSGE model, shadow banking system, too low for too long, boom-bust JEL codes: E32, E44, E52, G24
Note: Ilmestynyt myös International Journal of Central Banking 9 ; 3 ; 2013.
Rights: https://helda.helsinki.fi/bof/copyright

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