Watering a lemon tree: heterogeneous risk taking and monetary policy transmission
| Autor: | Dong Beom Choi, Tanju Yorulmazer, Thomas M. Eisenbach |
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| Přispěvatelé: | Yorulmazer, Tanju, Choi, D.B., Eisenbach, T.M., College of Administrative Sciences and Economics, Department of Economics |
| Jazyk: | angličtina |
| Rok vydání: | 2020 |
| Předmět: |
Economics and Econometrics
Leverage (finance) Stimulus (economics) General equilibrium theory media_common.quotation_subject Financial intermediary monetary policy transmission financial frictions heterogeneous agents financial intermediation jel:G20 Monetary economics 0502 economics and business Economics Financial frictions Financial intermediation Heterogeneous agents Monetary policy transmission health care economics and organizations media_common 040101 forestry 050208 finance 05 social sciences Monetary policy Bank Runs Shadow Banking System jel:E52 04 agricultural and veterinary sciences jel:E58 Liquidity risk Interest rate Credit channel Loan 0401 agriculture forestry and fisheries Finance |
| Zdroj: | Journal of Financial Intermediation |
| Popis: | We build a general equilibrium model with financial frictions that impede monetary policy transmission. Agents with heterogeneous productivity can increase investment by levering up, which increases liquidity risk due to maturity transformation. In equilibrium, more productive agents choose higher leverage than less productive agents, which exposes the more productive agents to greater liquidity risk and makes their investment less responsive to interest rate changes. When monetary policy reduces interest rates, aggregate investment quality deteriorates, which blunts the monetary stimulus and decreases asset liquidation values. This, in turn, reduces loan demand, decreasing the interest rate further and generating a negative spiral. Overall, the allocation of credit is distorted and monetary stimulus can become ineffective even with significant interest rate drops. NA |
| Databáze: | OpenAIRE |
| Externí odkaz: |
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