Monetary transmission under competing corporate finance regimes = Transmisión monetaria bajo regímenes alternativos de finanzas corporativas

de Grauwe, Paul ORCID: 0000-0001-5225-1301 and Gerba, Eddie (2017) Monetary transmission under competing corporate finance regimes = Transmisión monetaria bajo regímenes alternativos de finanzas corporativas. Ensayos Sobre Política Económica, 35 (82). pp. 78-100. ISSN 0120-4483

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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:	Article
Official URL:	http://www.journals.elsevier.com/ensayos-sobre-pol...
Additional Information:	© 2017 Banco de la República de Colombia
Divisions:	European Institute
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
Date Deposited:	09 Sep 2016 10:50
Last Modified:	12 Dec 2024 01:22
Projects:	612955
Funders:	European Union’s Seventh Framework Programme
URI:	http://eprints.lse.ac.uk/id/eprint/67658

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