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This paper analyses the case of a monetary union composed of countries with heterogeneous "credit channels". In order to better insulate the economies from the asymmetric effects produced by differences in national financial systems, a money supply process based on the interest rate on bonds and its spread with respect to the bank lending rate is proposed. would characterise optimal policy under discretion ought to include a reaction to credit. spreads and the nominal interest rate. Third, we show that, in our model, an aggressive easing of monetary policy is optimal. in response to an adverse financial market shock that increases the credit spread. Financially Heterogeneous Monetary Union Jakob Paleky February 4, study the optimal monetary policy in a currency union with a cost channel di⁄erential and focus on demand shocks. The cost channel makes monetary policy less e⁄ective in combating in⁄ation. On the one hand, the optimal response is a stronger use of the interest. Optimal Monetary Policy and Liquidity with Heterogeneous HouseholdsI Florin O. BilbiieII PSE and CEPR Xavier RagotIII We study Ramsey-optimal monetary policy in this framework, and unveil aŠ to the best of our knowledgeŠ novel channel that we call the liquidity-insurance motive, for short: with imperfect in-surance (inequality) there is a.
First, compared to Nash, in a low-debt monetary union, the leading big country's fiscal authority chooses to be relatively more debt-adjusting (especially through manipulating the costless tax rate), 27 once monetary policy controls for excessive inflation at the union-wide level. Thus, at country B, and relative to Nash, the tax rate gap increases by more, generating higher domestic (and union-wide Cited by: 1. Optimal monetary policy with heterogeneous We study the optimal monetary policy in a competitive ﬂexible-price economy where inﬁnity- markets and heterogeneous agents allow for a potential redistributive role of monetary policy were ﬁrst studied by Levine (). They have since been explored in a variety of contexts by. Book description. Proper conduct of monetary policy requires understanding the monetary transmission mechanism, to monitor the economy, make decisions on the stance of policy, and explain the policy actions to the public. Hence, gathering evidence on the monetary transmission mechanism in the euro area has been a priority for the Eurosystem. Ravenna and Walsh (). With an uncertain cost channel, the monetary authority tends to overestimate the cost-push e⁄ect of an interest rate hike which leads to a less aggressive interest rate response. Michaelis and Palek () study the optimal monetary policy in a currency union with a cost channel di⁄erential and focus on demand shocks.
Market Deregulation and Optimal Monetary Policy in a Monetary Monetary union; Optimal monetary policy. as it removes additional policy tradeoﬀs induced by heterogeneous market regulation in the monetary union. The intuition for our results is straightforward. The initial steady state with high regulation inCited by: COVID Resources. Reliable information about the coronavirus (COVID) is available from the World Health Organization (current situation, international travel).Numerous and frequently-updated resource results are available from this ’s WebJunction has pulled together information and resources to assist library staff as they consider how to handle . We analyze the optimal policy mix of monetary and fiscal authorities in a currency union with a country-specific credit spread by introducing a cost channel differential. The cost channel decreases the efficiency of monetary policy and increases the need for fiscal : Jakob Palek. We analyze the optimal policy mix of monetary and fiscal authorities in a currency union with a country-specific credit spread by introducing a cost channel differential. The cost channel decreases the efficiency of monetary policy and increases the need for fiscal stabilization.