CEU Electronic Theses and Dissertations, 2017
| Author | Vajda, Balázs |
|---|---|
| Title | Optimal Monetary Policy in the Presence of Financial Frictions |
| Summary | I study the welfare properties and the behavior of a model economy where financial intermediaries face endogenously determined balance sheet constraints and monetary policy follows simple instrument rules. An optimal commitment policy is used as a point of comparison. I use the framework to assess the performances of alternative interest rate rule regimes and to clarify the explicit target variables that contribute the most to the welfare-maximizing optimal monetary policy. I also evaluate the effects of unconventional monetary policy intervention and its interplay with the conventional inflation targeting Taylor-rule as well as the proposed optimal interest rate rule. My findings suggest that quantitative easing within my model framework have a moderating effect in a financial crisis situation under an inflation targeting regime but damaging effects under the optimal monetary policy. If monetary policy is conducted under a nominal GDP growth targeting regime in a crisis situation, then the benefits from this policy change is substantially higher than using unconventional tools. |
| Supervisor | Világi Balázs |
| Department | Economics MA |
| Full text | https://www.etd.ceu.edu/2017/vajda_balazs.pdf |
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