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

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 
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) too low for too long interest rates,
(ii) excessive optimism and (iii) a failure of agents to anticipate the extent of the abnormally
favorable conditions.
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Metadaten
Author:Fabio Verona, Manuel M. F. Martins, Inês Drumond
URN:urn:nbn:de:hebis:30:3-268698
Series (Serial Number):Working Paper Series : Institute for Monetary and Financial Stability (56)
Document Type:Working Paper
Language:English
Year of first Publication:2012
Publishing Institution:Univ.-Bibliothek Frankfurt am Main
Release Date:2012/11/07
Tag:DSGE model; boom-bust; shadow banking system; too low for too long
Institutes: Institute for Monetary and Financial Stability (IMFS)
Dewey Decimal Classification:330 Wirtschaft
JEL-Classification:E32 Business Fluctuations; Cycles
E44 Financial Markets and the Macroeconomy
E52 Monetary Policy
G24 Investment Banking; Venture Capital; Brokerage; Ratings and Ratings Agencies (Updated!)
Sammlungen:Universitätspublikationen
Licence (German):License Logo Veröffentlichungsvertrag für Publikationen

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