Monetary policy in models with financial frictions / von Lukas Mayr
VerfasserMayr, Lukas
Begutachter / BegutachterinReiter, Michael
UmfangV, 45 Bl. : graph. Darst.
HochschulschriftWien, Techn. Univ., Master Thesis, 2013
URNurn:nbn:at:at-ubtuw:1-74337 Persistent Identifier (URN)
 Das Werk ist frei verfügbar
Monetary policy in models with financial frictions [0.47 mb]
Zusammenfassung (Englisch)

In this paper I discuss a dynamic stochastic general equilibrium model that incorporates banks as distinct economic agents. A financial friction constrains banks' ability to supply credit. In an economic recession, this friction leads to an amplication of the downturn. The model allows for an unconventional monetary policy similar to the one observed during the recent crisis. By directly supplying credit, the central bank is able to dampen economic contractions. I explain the mechanisms of the model on the basis of a simulated crisis and I discuss potential deciencies. One criticism of the model was that non-financial firms are financed solely via loans from banks, without being able to accumulate net worth, which they could use to self-finance a portion of their investments. As this assumption overstates the importance of the financial sector, it potentially could also overestimate the benefits of unconventional monetary policy. I change the model in order to adopt a more realistic financing structure of firms. Within my framework the benefits of unconventional monetary policy remain substantial. In the remainder of the thesis, I introduce modifications of the model that try to capture more features observed during the Great Recession.