EconStor >
Leibniz Universität Hannover >
Wirtschaftswissenschaftliche Fakultät, Universität Hannover >
Diskussionspapiere, Wirtschaftswissenschaftliche Fakultät, Universität Hannover >

Please use this identifier to cite or link to this item:

http://hdl.handle.net/10419/27211
  
Title:Fiscal, monetary, and financial interactions in dynamic general equilibrium PDF Logo
Authors:Strulik, Holger
Issue Date:2008
Series/Report no.:Discussion papers // School of Economics and Management of the Hanover Leibniz University 402
Abstract:This paper proposes a model that links households and firms, as usual, by markets for factors and goods and, additionally, by a banking sector that channels households' funds to firms and eliminates idiosyncratic risk. In equilibrium, agency costs and tax benefits of corporate debt are equalizing each other, which renders an institutionally based explanation of financial structure. Adjustment of corporate finance adds to the ordinary savings channel of fiscal and monetary policy. Taking real and financial interactions into account, the model predicts a somewhat lower impact of fiscal policy on macroeconomic aggregates as commonly assessed and a much stronger impact of monetary policy. This amplification is caused by the banking sector's translation of borrowing rates into lending rates and vice versa.
Subjects:Fiscal Policy
Monetary Policy
Corporate Finance
Agency Costs
Banking
Economic Growth
Business Cycles
This paper proposes a model that links households and firms, as usual, by markets for factors and goods and, additionally, by a banking sector that channels households' funds to firms and eliminates idiosyncratic risk. In equilibrium, agency costs and tax benefits of corporate debt are equalizing each other, which renders an institutionally based explanation of financial structure. Adjustment of corporate finance adds to the ordinary savings channel of fiscal and monetary policy. Taking real and financial interactions into account, the model predicts a somewhat lower impact of fiscal policy on macroeconomic aggregates as commonly assessed and a much stronger impact of monetary policy. This amplification is caused by the banking sector's translation of borrowing rates into lending rates and vice versa.
JEL:E44
E52
E62
O16
Document Type:Working Paper
Appears in Collections:Diskussionspapiere, Wirtschaftswissenschaftliche Fakultät, Universität Hannover

Files in This Item:
File Description SizeFormat
571446868.PDF356.52 kBAdobe PDF
No. of Downloads: Counter Stats
Download bibliographical data as: BibTeX
Share on:http://hdl.handle.net/10419/27211

Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.