Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/57966
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dc.contributor.authorCao, Jinen_US
dc.contributor.authorIlling, Gerharden_US
dc.date.accessioned2012-05-15en_US
dc.date.accessioned2012-05-21T10:07:02Z-
dc.date.available2012-05-21T10:07:02Z-
dc.date.issued2012en_US
dc.identifier.urihttp://hdl.handle.net/10419/57966-
dc.description.abstractThis paper provides a framework for modeling the risk-taking channel of monetary policy, the mechanism how financial intermediaries' incentives for liquidity transformation are affected by the central bank's reaction to financial crisis. Anticipating central bank's reaction to liquidity stress gives banks incentives to invest in excessive liquidity transformation, triggering an 'interest rate trap' - the economy will remain stuck in a long lasting period of sub-optimal, low interest rate equilibrium. We demonstrate that interest rate policy as financial stabilizer is dynamically inconsistent, and the constraint efficient outcome can be implemented by imposing ex ante liquidity requirements.en_US
dc.language.isoengen_US
dc.publisher|aCenter for Economic Studies and Ifo Institute (CESifo) |cMunichen_US
dc.relation.ispartofseries|aCESifo working paper: Monetary Policy and International Finance |x3794en_US
dc.subject.jelE50en_US
dc.subject.jelG21en_US
dc.subject.jelG28en_US
dc.subject.ddc330en_US
dc.subject.keywordinterest rate trapen_US
dc.subject.keywordrisk-taking channelen_US
dc.subject.keywordsystemic risken_US
dc.subject.keywordliquidity requirementsen_US
dc.subject.keywordmacroprudential regulationen_US
dc.title"Interest Rate Trap", or: Why does the central bank keep the policy rate too low for too long time?en_US
dc.typeWorking Paperen_US
dc.identifier.ppn715725645en_US
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungenen_US

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