The Balance Sheet Channel

descriptionPublicationkeyboard_double_arrow_right Article , Other literature type , Preprint 01 Jan 2013 English Publisher:Elsevier BVJournal:SSRN Electronic Journal (eissn: 1556-5068,

Copyright policy )

Authors: Ethan Cohen-Cole; Enrique Martinez-Garcia;

doi: 10.2139/ssrn.2365048

The Balance Sheet Channel

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Abstract

In this paper, we study the role of the credit channel of monetary policy in the context of a DSGE model. Through the use of a regulated banking sector subject to a regulatory capital constraint on lending, we provide alternative interpretations that can potentially explain differences in the implementation of monetary policy without appealing to ad-hoc central bank preferences. This is accomplished through the characterization of the external finance premium as a function of bank leverage and systemic aggregate risk.

Related Organizations

Federal Reserve Bank of Dallas
United States
Federal Reserve Bank of Dallas
United States

Keywords

Monetary policy

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