Arbeitspapier
Financial frictions, durable goods and monetary policy
This paper examines the effect of financial frictions on the consumption of durables and non-durables in a two-sector dynamic stochastic general equilibrium (DSGE) model with sticky prices and heterogeneous agents. The financial frictions are a combination of loanto- value (LTV) and payment-to-income (PTI) constraints faced by borrowers. In this setting, a monetary contraction drastically reduces the maximum amount consumers can borrow to purchase durable goods. As a result, the model predicts that the consumption of durables falls, along with non-durables, even when durable prices are fully flexible. Also, output falls and the nominal interest rate increases following monetary tightening. Thus, our model's predictions better match the data than models in existing literature.
- Language
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Englisch
- Bibliographic citation
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Series: Bank of Canada Staff Working Paper ; No. 2019-31
- Classification
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Wirtschaft
Financial Markets and the Macroeconomy
Monetary Policy
- Subject
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Monetary policy
Financial system regulation and policies
- Event
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Geistige Schöpfung
- (who)
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Emenogu, Ugochi T.
Michelis, Leo
- Event
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Veröffentlichung
- (who)
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Bank of Canada
- (where)
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Ottawa
- (when)
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2019
- DOI
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doi:10.34989/swp-2019-31
- Handle
- Last update
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10.03.2025, 11:44 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Emenogu, Ugochi T.
- Michelis, Leo
- Bank of Canada
Time of origin
- 2019
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