American Economic Review Vol. 106 No. 5 2016
Sooner or Later: Timing of Monetary Policy with Heterogeneous Risk-Taking
Abstract
We analyze the effects and interactions of monetary policy tools that differ in terms of their timing and their targeting. In a model with heterogeneous agents, more productive agents endogenously expose themselves to higher interim liquidity risk by borrowing and investing more. Two inefficiencies impair the transmission of monetary policy: an investment- and a hoarding inefficiency. Heterogeneous agents respond disparately to ex-ante, conventional and ex-post, unconventional monetary policy. However, we show that the two policies are equivalent due to the endogeneity of hoarding. In contrast, targeted interventions such as discount-window lending can alleviate both inefficiencies at the same time.
- DOI
- 10.1257/aer.p20161077
- Volume
- 106
- Issue
- 5
- Pages
- 490-495
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref