NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Susan Schommer

Instituto Nacional de Matemática Pura e Aplicada

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NBER Working Papers and Publications

December 2013Conventional and Unconventional Monetary Policy with Endogenous Collateral Constraints
with Aloísio Araújo, Michael Woodford: w19711
We consider the effects of central-bank purchases of a risky asset, financed by issuing riskless nominal liabilities (reserves), as an additional dimension of policy alongside "conventional" monetary policy (central-bank control of the riskless nominal interest rate), in a general-equilibrium model of asset pricing and risk sharing with endogenous collateral constraints of the kind proposed by Geanakoplos (1997). The existence of collateral constraints allows our model to capture the common view that large enough central-bank purchases would eventually have to affect asset prices. But even when central-bank purchases raise the price of the asset, owing to binding collateral constraints, the effects need not be the ones commonly assumed. We show that under some circumstances, central-bank p...

Published:

October 2013Conventional and Unconventional Monetary Policy with Endogenous Collateral Constraints
with Aloísio Araújo, Michael Woodford
in Lessons from the Financial Crisis for Monetary Policy, Mark Gertler, organizer
 
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