Template-Type: ReDIF-Paper 1.0
Series: Tinbergen Institute Discussion Papers
Creation-Date: 2010-06-21
Number: 10-057/2
Author-Name: Andreas Schabert
Author-Workplace-Name: Dortmund University, and University of Amsterdam
Title: Optimal Central Bank Lending
Abstract: We analyze optimal monetary policy in a sticky pricemodel where the central bank supplies money outrightvia asset purchases and lends money temporarily againstcollateral. The terms of central bank lending affect ra-tioning of money and impact on macroeconomic aggre-gates. The central bank can set the policy rate and itsinflation target in a way that implements the first bestlong-run allocation, which is impossible if money weresupplied in a lump-sum way (as commonly assumed).Efficient central bank lending further increases gainsfrom macroeconomic stabilization beyond pure interestrate policy. This requires departing from a "Treasuries-only" regime.
Classification-JEL: E4; E5, E32
Keywords: Optimal monetary policy, central bank instruments, collateralized lending, liquidity premium, inflation
File-Url: https://papers.tinbergen.nl/10057.pdf
File-Format: application/pdf
File-Size: 367102 bytes
Handle: RePEc:tin:wpaper:20100057