Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/104783
Authors: 
Spahn, Peter
Year of Publication: 
2014
Series/Report no.: 
ROME Discussion Paper Series 14-09
Abstract: 
The growth and deepening of financial markets entailed the expectation that the bank lending channel of monetary policy transmission would lose its importance. The paper explains why, on the contrary, the banking sector has become a major locus of origination and amplification of macro-financial shocks. Mutual feedback mechanisms between the financial and the real sector are analysed and simulated by using a simple standard macro model with an integrated banking system. A comparison of the efficiency of various Taylor Rule extensions explores whether monetary stabilisation can be improved by additional interest rate reactions to asset prices, bank lending, bank leverage or the spread between the loan and the policy rate.
Subjects: 
monetary policy transmission
credit market
leverage targeting
risk-taking channel
asset market shocks
JEL: 
E1
E5
G2
Document Type: 
Working Paper

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