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Monetary Policy and the Asset Risk-Taking Channel
| Content Provider | Scilit |
|---|---|
| Author | Abbate, Angela Thaler, Dominik |
| Copyright Year | 2018 |
| Description | Journal: Ssrn Electronic Journal How important is the risk-taking channel for monetary policy? To answer this question, we develop and estimate a quantitative monetary DSGE model where banks choose excessively risky investments, due to an agency problem which distorts banks’ incentives. As the real interest rate declines, these distortions become more important and excessive risk taking increases, lowering the efficiency of investment. We show that this novel transmission channel generates a new and quantitatively significant monetary policy trade-off between inflation and real interest rate stabilization: it is optimal for the central bank to tolerate greater inflation volatility in exchange for lower risk taking. |
| Related Links | https://www.econstor.eu/bitstream/10419/126567/1/847121976.pdf https://papers.ssrn.com/sol3/Delivery.cfm?abstractid=3120271 |
| ISSN | 10914358 |
| e-ISSN | 15565068 |
| DOI | 10.2139/ssrn.3120271 |
| Journal | Ssrn Electronic Journal |
| Language | English |
| Publisher | Elsevier BV |
| Publisher Date | 2018-02-08 |
| Access Restriction | Open |
| Subject Keyword | Journal: Ssrn Electronic Journal Mathematical Social Sciences Bank Risk Monetary Policy Dsge Models |
| Content Type | Text |
| Resource Type | Article |
| Subject | Public Health, Environmental and Occupational Health Psychiatry and Mental Health |