Arbeitspapier

Stochastic discounting and the transmission of money supply shocks

This paper studies the effects of money supply shocks in a general equilibrium model that reproduces a term premium of the magnitude observed in the data. In an environment where financial frictions are the main source of monetary non-neutrality, I find that money supply shocks are less effective at stimulating inflation in recessions than in expansions. In terms of quantitative magnitude, the impact effect on inflation of a money supply shock is about half as large during recessions than during booms. This state dependence is essentially due to the time-variation in stochastic discounting that is needed to match the data.

Language
Englisch
ISBN
978-92-899-3279-0

Bibliographic citation
Series: ECB Working Paper ; No. 2174

Classification
Wirtschaft
Price Level; Inflation; Deflation
Financial Markets and the Macroeconomy
Central Banks and Their Policies
Subject
Bond premium puzzle
financial frictions
time-varying risk aversion
euro zone economy

Event
Geistige Schöpfung
(who)
Jaccard, Ivan
Event
Veröffentlichung
(who)
European Central Bank (ECB)
(where)
Frankfurt a. M.
(when)
2018

DOI
doi:10.2866/81461
Handle
Last update
20.09.2024, 8:22 AM CEST

Data provider

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Object type

  • Arbeitspapier

Associated

  • Jaccard, Ivan
  • European Central Bank (ECB)

Time of origin

  • 2018

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