Optimal monetary and macroprudential policies / by Josef Schroth.: FB3-5/2021-21E-PDF
"This paper studies monetary policy in an economy where banks make risky loans to firms and provide liquidity services in the form of deposits to households. For given bank equity, market discipline implies that banks can take more deposits when assets are safer or more profitable. Banks respond to loan losses by making their balance sheets safer—i.e., they reduce risky lending sharply and accumulate more safe bonds. In contrast, a social planner would respond by making banks temporarily more profitable such that a riskier balance sheet can be maintained. A planner would temporarily reduce the expansiveness of monetary policy to avoid bonds becoming too liquid in support of the liquidity premium banks earn via deposits. Specifically, when bank equity is low, then optimal monetary policy stabilizes output by supporting bank lending rather than employment"--Abstract, page ii.
Permanent link to this Catalogue record:
publications.gc.ca/pub?id=9.902838&sl=0
| Department/Agency | Bank of Canada, issuing body. |
|---|---|
| Title | Optimal monetary and macroprudential policies / by Josef Schroth. |
| Series title | Staff working paper = Document de travail du personnel, 1701-9397 ; 2021-21 |
| Publication type | Series - View Master Record |
| Language | [English] |
| Format | Electronic |
| Electronic document | |
| Note(s) | "Last updated: May 7, 2021." Includes bibliographical references (pages 38-41). |
| Publishing information | Ottawa, Ontario, Canada : Bank of Canada = Banque du Canada, 2021. ©2021 |
| Author / Contributor | Schroth, Josef, author. |
| Description | 1 online resource (ii, 41 pages) : charts. |
| Catalogue number |
|
| Subject terms | Monetary policy. Bank loans. Politique monétaire. Prêts bancaires. |
Request alternate formats
To request an alternate format of a publication, complete the Government of Canada Publications email form. Use the form’s “question or comment” field to specify the requested publication.- Date modified: