2007, English, Article, Working paper edition: Banking and interest rates in monetary policy analysis [electronic resource] : a quantitative exploration / Marvin Goodfriend, Bennett T. McCallum. Goodfriend, Marvin.

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Published
  • Cambridge, MA : National Bureau of Economic Research, c2007.
Language
  • English

Edition details

Title
  • Banking and interest rates in monetary policy analysis : a quantitative exploration /​ Marvin Goodfriend, Bennett T. McCallum.
Author
  • Goodfriend, Marvin.
Other Authors
  • McCallum, Bennett T.
  • National Bureau of Economic Research
Published
  • Cambridge, MA : National Bureau of Economic Research, c2007.
Medium
  • [electronic resource]
Series
Summary
  • "The paper reconsiders the role of money and banking in monetary policy analysis by including a banking sector and money in an optimizing model otherwise of a standard type. The model is implemented quantitatively, with a calibration based on U.S. data. It is reasonably successful in providing an endogenous explanation for substantial steady-state differentials between the interbank policy rate and (i) the collateralized loan rate, (ii) the uncollateralized loan rate, (iii) the T-bill rate, (iv) the net marginal product of capital, and (v) a pure intertemporal rate. We find a differential of over 3 % pa between (iii) and (iv), thereby contributing to resolution of the equity premium puzzle. Dynamic impulse response functions imply pro-or-counter-cyclical movements in an external finance premium that can be of quantitative significance. In addition, they suggest that a central bank that fails to recognize the distinction between interbank and other short rates could miss its appropriate settings by as much as 4% pa. Also, shocks to banking productivity or collateral effectiveness call for large responses in the policy rate"--National Bureau of Economic Research web site.
Notes
  • Title from PDF file as viewed on 7/​31/​2007.
  • Includes bibliographical references.
  • Also available in print.
Technical Details
  • System requirements: Adobe Acrobat Reader.
  • Mode of access: World Wide Web.
Language
  • English
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