Please use this identifier to cite or link to this item:
http://bura.brunel.ac.uk/handle/2438/8238
Title: | Investment cost channel and monetary transmission |
Authors: | Basso, HS Coto-Martinez, J |
Keywords: | Cost channel;Investment finance;Taylor rule;Indeterminacy |
Issue Date: | 2011 |
Publisher: | Central Bank of the Republic of Turkey |
Citation: | Central Bank Review, 11, 1-13, 2011 |
Abstract: | We show that a standard DSGE model with investment cost channels has important model stability and policy implications. Our analysis suggests that in economies characterized by supply side well as demand side channels of monetary transmission, policymakers may have to resort to a much more aggressive stand against inflation to obtain locally unique equilibrium. In such an environment targeting output gap may cause model instability. We also show that it is difficult to distinguish between the New Keynesian model and labor cost channel only case, while with investment cost channel differences are more significant. This result is important as it suggests that if one does not take into account the investment cost channel, one is underestimating the importance of supply side effects. |
Description: | Copyright @ 2011 Central Bank Review. This article is available open access through the publisher’s website at the link below. |
URI: | https://www3.tcmb.gov.tr/cbr/index.php/cbreview/article/view/263/223 http://bura.brunel.ac.uk/handle/2438/8238 |
ISSN: | 1303-0701 |
Appears in Collections: | Economics and Finance Dept of Economics and Finance Research Papers |
Files in This Item:
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Notice.pdf | 39.38 kB | Adobe PDF | View/Open |
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