American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Sooner or Later: Timing of Monetary Policy with Heterogeneous Risk-Taking
American Economic Review
vol. 106,
no. 5, May 2016
(pp. 490–95)
Abstract
We analyze the effects and interactions of monetary policy tools that differ in terms of their timing and their targeting. In a model with heterogeneous agents, more productive agents endogenously expose themselves to higher interim liquidity risk by borrowing and investing more. Two inefficiencies impair the transmission of monetary policy: an investment- and a hoarding inefficiency. Heterogeneous agents respond disparately to ex-ante, conventional and ex-post, unconventional monetary policy. However, we show that the two policies are equivalent due to the endogeneity of hoarding. In contrast, targeted interventions such as discount-window lending can alleviate both inefficiencies at the same time.Citation
Choi, Dong Beom, Thomas M. Eisenbach, and Tanju Yorulmazer. 2016. "Sooner or Later: Timing of Monetary Policy with Heterogeneous Risk-Taking." American Economic Review, 106 (5): 490–95. DOI: 10.1257/aer.p20161077Additional Materials
JEL Classification
- E22 Investment; Capital; Intangible Capital; Capacity
- E52 Monetary Policy