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dc.contributor.authorChadha, Jagjit S.en
dc.contributor.authorCorrado, Luisaen
dc.contributor.authorHolly, Seanen
dc.date.accessioned2011-10-21T16:53:25Z-
dc.date.available2011-10-21T16:53:25Z-
dc.date.issued2008-
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
dc.language.isoengen
dc.publisher|aUniversity of Kent, Department of Economics |cCanterburyen
dc.relation.ispartofseries|aDepartment of Economics Discussion Paper |x08,16en
dc.subject.jelE31en
dc.subject.jelE40en
dc.subject.jelE51en
dc.subject.ddc330en
dc.subject.keywordmoneyen
dc.subject.keywordDSGEen
dc.subject.keywordpolicy rulesen
dc.subject.keywordexternal finance premiumen
dc.subject.stwGeldpolitiken
dc.subject.stwGeldangeboten
dc.subject.stwKreditsicherungen
dc.subject.stwZinsstrukturen
dc.subject.stwInflationsrateen
dc.subject.stwDynamisches Gleichgewichten
dc.titleReconnecting money to inflation: The role of the external finance premium-
dc.typeWorking Paperen
dc.identifier.ppn588111198en
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungenen

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