Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/50625
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dc.contributor.authorChadha, Jagjit S.en_US
dc.contributor.authorCorrado, Luisaen_US
dc.contributor.authorHolly, Seanen_US
dc.date.accessioned2011-10-21T16:53:25Z-
dc.date.available2011-10-21T16:53:25Z-
dc.date.issued2008en_US
dc.identifier.urihttp://hdl.handle.net/10419/50625-
dc.description.abstractWe re-connect money to in.ation using Goodfriend and McCallum's (2007) model where banks supply loans to cash-in-advance constrained consumers on the basis of the value of collateral provided and the monitoring skills of banks. We show that when shocks to monitoring and collateral dominate those to goods productivity and the velocity of money demand, money and the external finance premium become closely linked. This is because increases in asset prices allow banks to raise the supply of loans leading to an expansion in aggregate demand, via a compression of financial interest rates spreads, which in turn tends to be inflationary. Thus money and financial spreads are negatively correlated when banking sector shocks dominate. We suggest a simple augmented stabilising monetary policy rule that exploits the joint information from money and the external finance premium.en_US
dc.language.isoengen_US
dc.publisher|aUniv. of Kent, School of Economics |cCanterburyen_US
dc.relation.ispartofseries|aSchool of Economics discussion papers |x08,16en_US
dc.subject.jelE31en_US
dc.subject.jelE40en_US
dc.subject.jelE51en_US
dc.subject.ddc330en_US
dc.subject.keywordmoneyen_US
dc.subject.keywordDSGEen_US
dc.subject.keywordpolicy rulesen_US
dc.subject.keywordexternal finance premiumen_US
dc.subject.stwGeldpolitiken_US
dc.subject.stwGeldangeboten_US
dc.subject.stwKreditsicherungen_US
dc.subject.stwZinsstrukturen_US
dc.subject.stwInflationsrateen_US
dc.subject.stwDynamisches Gleichgewichten_US
dc.titleReconnecting money to inflation: The role of the external finance premiumen_US
dc.typeWorking Paperen_US
dc.identifier.ppn588111198en_US
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungenen_US

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