Cookies?
Library Header Image
LSE Research Online LSE Library Services

Monetary transmission under competing corporate finance regimes

de Grauwe, Paul and Gerba, Eddie (2016) Monetary transmission under competing corporate finance regimes. FinMaP working papers, 52. FinMaP, London, UK.

Full text not available from this repository.

Identification Number: 52

Abstract

The behavioural agent-based framework of De Grauwe and Gerba (2015) is extended to allow for a counterfactual exercise on the role of banks for monetary transmissions. A bank-based corporate financing friction is introduced and the relative contribution of that friction to the effectiveness of monetary policy is evaluated. We find convincing evidence that the monetary transmission channel is stronger in the bank-based system compared to the market-based. Impulse responses to a monetary expansion are around the double of those in the market-based framework. The (asymmetric) effectiveness of monetary policy in counteracting busts is, on the other hand, relatively higher in the market-based model. The statistical fit of the bank-based behavioural model is also improved compared to the benchmark model. Lastly, we find that a market-based (bankbased) financing friction in a general equilibrium produces highly asymmetric (symmetric) distributions and more (less) pronounced business cycles.

Item Type: Monograph (Working Paper)
Official URL: http://www.finmap-fp7.eu/index.html
Additional Information: © 2016 The Authors
Subjects: H Social Sciences > HG Finance
J Political Science > JN Political institutions (Europe)
JEL classification: E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E44 - Financial Markets and the Macroeconomy
E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E52 - Monetary Policy (Targets, Instruments, and Effects)
G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
G - Financial Economics > G3 - Corporate Finance and Governance > G32 - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure
Sets: Departments > European Institute
Collections > Economists Online
Date Deposited: 09 Sep 2016 10:44
Last Modified: 09 Sep 2016 10:44
Projects: 612955
Funders: European Union’s Seventh Framework Programme
URI: http://eprints.lse.ac.uk/id/eprint/67657

Actions (login required)

View Item View Item