Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/222977
Authors: 
Kotb, Naira
Proaño Acosta, Christian
Year of Publication: 
2020
Series/Report no.: 
BERG Working Paper Series 158
Abstract: 
In this paper we incorporate a stock market and a banking sector in a behavioral macro-finance model with heterogenous and boundedly rational expectations. Households' savings are diversified among bank deposits and stock purchases, and banks' lending to firms is subject to capital-related costs. We find that households' participation in the stock market, coupled to the existence of a capital-constrained banking sector affects the transmission of monetary policy to the economy significantly, and that households' deposits act as a critical spill-over channel between the real and the financial sectors. In other words, we relate the regulatory stance in the banking sector with the degree of pass-through of monetary policy shocks. Further, we investigate the performance of a leaning-against-the-wind (LATW) monetary policy which targets asset prices concerning macroeconomic and financial stability.
Subjects: 
Behavioral Macroeconomics
Banking
Stock Markets
Monetary Policy
JEL: 
E44
E52
G21
ISBN: 
978-3-943153-79-8
Document Type: 
Working Paper

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