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Financial Systems and the Cost Channel Transmission of Monetary Policy Shocks

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Abstract
In this paper we study the role of financial systems for the cost channel transmission of monetary policy in a calibrated business cycle model. We analyze the different effects that monetary policy has on the economy, in particular on output and inflation, which are due to differences in country-specific financial systems. For a plausible calibration of the model, differences in financial systems have a rather limited effect on the transmission mechanism and do not appear to give rise to cross country differences in the strength of the cost channel.

Suggested Citation

  • Sylvia Kaufmann & Johann Scharler, 2007. "Financial Systems and the Cost Channel Transmission of Monetary Policy Shocks," Working Papers 116, Oesterreichische Nationalbank (Austrian Central Bank).
    • Handle: RePEc:onb:oenbwp:116
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    Cited by:

    1. Schäfer, Dorothea & Stephan, Andreas & Trung Hoang, Khanh, 2017. "The Cost Channel Effect of Monetary Transmission: How Effective is the ECB's Low Interest Rate Policy for Increasing Inflation?," Ratio Working Papers 287, The Ratio Institute.
    2. Giuseppe Ciccarone & Francesco Giuli & Danilo Liberati, 2012. "The effects of monetary policy shocks in credit and labor markets with search and matching frictions," Working Papers in Public Economics 151, Department of Economics and Law, Sapienza University of Roma.
    3. Ciccarone, Giuseppe & Giuli, Francesco & Liberati, Danilo, 2014. "Incomplete interest rate pass-through under credit and labor market frictions," Economic Modelling, Elsevier, vol. 36(C), pages 645-657.
    4. Danilo Liberati, 2018. "An estimated DSGE model with search and matching frictions in the credit market," International Journal of Monetary Economics and Finance, Inderscience Enterprises Ltd, vol. 11(6), pages 567-617.
    5. Pierre-Richard Agénor & Koray Alper, 2012. "Monetary shocks and central bank liquidity with credit market imperfections," Oxford Economic Papers, Oxford University Press, vol. 64(3), pages 563-591, July.
    6. Malikane, Christopher, 2012. "Inflation dynamics and the cost channel in emerging markets," MPRA Paper 42688, University Library of Munich, Germany.
    7. Meixing Dai & Qiao Zhang, 2013. "Central bank transparency with the cost channel," Working Papers of BETA 2013-06, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    8. Nikhil Patel, 2016. "International Trade Finance and the Cost Channel of Monetary Policy in Open Economies," BIS Working Papers 539, Bank for International Settlements.
    9. Agénor, Pierre-Richard & Aynaoui, Karim El, 2010. "Excess liquidity, bank pricing rules, and monetary policy," Journal of Banking & Finance, Elsevier, vol. 34(5), pages 923-933, May.
    10. Ida, Daisuke, 2014. "Role of financial systems in a sticky price model," Journal of Economics and Business, Elsevier, vol. 72(C), pages 44-57.
    11. Sylvia Kaufmann & Johann Scharler, 2009. "Bank-Lending Standards, the Cost Channel and Inflation Dynamics," Economics working papers 2009-16, Department of Economics, Johannes Kepler University Linz, Austria.
    12. Francesco Giuli & Massimiliano Tancioni, 2009. "Firm-Specific Capital, Productivity Shocks and Investment Dynamics," Working Papers in Public Economics 120, Department of Economics and Law, Sapienza University of Roma.
    13. Hülsewig, Oliver & Mayer, Eric & Wollmershäuser, Timo, 2009. "Bank behavior, incomplete interest rate pass-through, and the cost channel of monetary policy transmission," Economic Modelling, Elsevier, vol. 26(6), pages 1310-1327, November.
    14. Claudia Kwapil & Johann Scharler, 2006. "Limited Pass-Through from Policy to Retail Interest Rates: Empirical Evidence and Macroeconomic Implications," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue 4, pages 26-36.
    15. Tayler, William & Zilberman, Roy, 2014. "Macroprudential Regulation and the Role of Monetary Policy," Dynare Working Papers 37, CEPREMAP.
    16. Salmanov, Oleg & Zaernyuk, Viktor, 2015. "Роль Банковского Канала В Передаче Денежно-Кредитной Политики В России [The role of the banking channel in the transmission of monetary policy in Russia]," MPRA Paper 112388, University Library of Munich, Germany, revised 01 Nov 2015.
    17. repec:onb:oenbwp:y::i:164:b:1 is not listed on IDEAS
    18. Giuli, Francesco & Tancioni, Massimiliano, 2012. "Real rigidities, productivity improvements and investment dynamics," Journal of Economic Dynamics and Control, Elsevier, vol. 36(1), pages 100-118.
    19. Kapinos, Pavel, 2011. "Forward-looking monetary policy and anticipated shocks to inflation," Journal of Macroeconomics, Elsevier, vol. 33(4), pages 620-633.
    20. Meixing Dai & Qiao Zhang, 2017. "Central bank transparency under the cost channel," International Finance, Wiley Blackwell, vol. 20(2), pages 189-209, June.

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    More about this item

    Keywords

    Financial Systems; Cost Channel; Transmission Mechanism;
    All these keywords.

    JEL classification:

    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General

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