Interest rates and monetary policy

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Gazioglu S., McCausland W. D.

APPLIED ECONOMICS, cilt.41, sa.16, ss.2005-2012, 2009 (SSCI) identifier

  • Yayın Türü: Makale / Tam Makale
  • Cilt numarası: 41 Sayı: 16
  • Basım Tarihi: 2009
  • Doi Numarası: 10.1080/00036840601019372
  • Dergi Adı: APPLIED ECONOMICS
  • Derginin Tarandığı İndeksler: Social Sciences Citation Index (SSCI), Scopus
  • Sayfa Sayıları: ss.2005-2012
  • Orta Doğu Teknik Üniversitesi Adresli: Evet

Özet

This article conducts a thorough intertemporal analysis of nominal interest rate based monetary policy. Its main contribution is to show how such a policy can have different effects depending on the assumptions made about the saving and borrowing behaviour of firms. We consider two cases: (i) consumers are savers and firms are borrowers and (ii) both consumers and firms are borrowers (the nation as a whole is borrowing from abroad). In one case we confirm conventional wisdom, but in the other case we find there may be unexpected and surprising results. Moreover, our analysis has important implications for both inflation and nominal exchange rate targeting policies.