Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/202428
Authors: 
Altermatt, Lukas
Year of Publication: 
2019
Series/Report no.: 
Working Paper 247
Abstract: 
I develop a model that explicitly takes the role of financial institutions in the transmission mechanism of monetary policy into account. Within this model, I find various equilibrium environments, with one of them resembling a standard environment for monetary policy and another one akin to a liquidity trap. I analyze what the effects of various monetary policy measures such as quantitative easing, open-market operations, helicopter money and negative interest rates are in all of these environments. I find that open-market operations, quantitative easing, and negative interest rates on reserves are powerless in a liquidity trap, while helicopter money can be used to increase investment. The model also shows that a floor system allows a central bank to implement monetary policy with less side effects, but at the cost of losing control over inflation through open-market operations.
Subjects: 
new monetarism
liquidity trap
helicopter money
negative interest rates
government debt
Ricardian equivalence
banking
floor vs channel system
JEL: 
E43
E52
E63
G21
H63
Document Type: 
Working Paper
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