Misallocation Costs of Digging Deeper into the Central Bank Toolkit

No 1347, 2017 Meeting Papers from Society for Economic Dynamics

Abstract: This paper examines the potential misallocation of resources induced by Central Bank large-scale asset purchases, particularly the purchase of corporate bonds of nonfinancial firms, through their heterogeneous effect on firms' cost of capital. First, we analytically demonstrate the mechanism in a static model with heterogeneous agents. We then evaluate the misallocation of resources induced by corporate bond buys and the associated output losses in a calibrated DSGE model of which Gertler Karadi (2013) is a special case.

Date: 2017
New Economics Papers: this item is included in nep-cba, nep-dge and nep-mon
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Citations: View citations in EconPapers (5)

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Related works:
Journal Article: Misallocation Costs of Digging Deeper into the Central Bank Toolkit (2020)
Working Paper: Misallocation Costs of Digging Deeper into the Central Bank Toolkit (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed017:1347

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