Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/86913
Authors: 
Schabert, Andreas
Year of Publication: 
2010
Series/Report no.: 
Tinbergen Institute Discussion Paper 10-057/2
Abstract: 
We analyze optimal monetary policy in a sticky pricemodel where the central bank supplies money outrightvia asset purchases and lends money temporarily againstcollateral. The terms of central bank lending affect ra-tioning of money and impact on macroeconomic aggre-gates. The central bank can set the policy rate and itsinflation target in a way that implements the first bestlong-run allocation, which is impossible if money weresupplied in a lump-sum way (as commonly assumed).Efficient central bank lending further increases gainsfrom macroeconomic stabilization beyond pure interestrate policy. This requires departing from a Treasuries-only regime.
Subjects: 
Optimal monetary policy
central bank instruments
collateralized lending
liquidity premium
inflation
JEL: 
E4
E5
E32
Document Type: 
Working Paper

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