Working Paper: NBER ID: w1575
Authors: Paul Jenkins; Carl E. Walsh
Abstract: The role of a real interest rate and a credit aggregate as intermediate monetary policy targets are investigated under the assumption of rational expectations. The analysis expands a standard aggregate model to include a credit market and a market determined interest rate on bank deposits. This allows the implications for output stabilization of real interest rate policy to be examined for a wider variety of shocks than normally considered in the literature, as well as allowing a credit aggregate policy to be studied.
Keywords: No keywords provided
JEL Codes: No JEL codes provided
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| real interest rates (E43) | aggregate output (E10) |
| real interest rates (E43) | demand for loans (E41) |
| demand for loans (E41) | aggregate output (E10) |
| real interest rates (E43) | economic stability (E63) |
| monetary authority's policy choices (E52) | economic stability (E63) |
| real interest rates (E43) | aggregate demand (E00) |
| credit aggregates (E51) | economic stability (E63) |
| real interest rates (E43) | credit aggregates (E51) |