Interest Rate Rules and the Credit Channel of Monetary Policy Transmission
نویسنده
چکیده
This paper develops a general equilibrium model with the banking system and the reserves market, where the central bank a¤ects the federal funds rate through open market operations. We show that when the coe¢ cient that measures the response of the federal funds rate to the ination rate falls below a threshold value, which is very small, the economy will have two steady states, where the low-equilibrium federal funds rate one is a saddle and the high-equilibrium federal funds rate one is a sink. Otherwise, the economy has a unique steady state which exhibits local determinacy. Keywords: Nominal Interest Rate Rules, Indeterminacy, The Credit Channel of Monetary Policy Transmission. JEL Classi cation: E51, E58. Address for correspondence: Department of Economics, National Taipei University, 151, University Rd., San Shia, Taipei, 237 Taiwan, 886-2-86747168, Fax: 886-2-26739727, E-mail: [email protected].
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