Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/25974
Authors: 
Berentsen, Aleksander
Monnet, Cyril
Year of Publication: 
2007
Series/Report no.: 
CESifo working paper 1929
Abstract: 
Channel systems for conducting monetary policy are becoming increasingly popular. Despite their popularity, the consequences of implementing policy with a channel system are not well understood. We develop a general equilibrium framework of a channel system and investigate the optimal policy. A novel aspect of the channel system is that a central bank can tighten or loosen its policy without changing its target rate by increasing the interest-rate spread symmetrically around the target rate. This questions the characterization of optimal policy through interest-rate rules, as done in a large body of the literature on the optimal design of interest-rate rules.
Subjects: 
monetary policy
interest rates
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JEL: 
E40
E50
D83
Document Type: 
Working Paper

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