By introducing search and matching frictions in both the labor and the credit markets into a cash in advance New Keynesian DSGE model, we provide a novel explanation of the incomplete pass-through from policy rates to loan rates. We show that this phenomenon is ineradicable if banks possess some power in the bargaining over the loan rate of interest, if the cost of posting job vacancies is positive and if firms and banks sustain costs when searching for lines of credit and when posting credit vacancies, respectively. We also show that the presence of credit market frictions moderates the reactions of employment and wages to a monetary shock. Finally, we confirm the finding that pass-through incompleteness has limited short-term impacts on the transmission of monetary policy shocks to output and inflation.

Giuli, F., Ciccarone, G., Liberati, D. (2014). Incomplete interest rate pass-through under credit and labor market frictions. ECONOMIC MODELLING, 36(C), 645-657 [10.1016/j.econmod.2013.02.040].

Incomplete interest rate pass-through under credit and labor market frictions

GIULI, FRANCESCO;
2014-01-01

Abstract

By introducing search and matching frictions in both the labor and the credit markets into a cash in advance New Keynesian DSGE model, we provide a novel explanation of the incomplete pass-through from policy rates to loan rates. We show that this phenomenon is ineradicable if banks possess some power in the bargaining over the loan rate of interest, if the cost of posting job vacancies is positive and if firms and banks sustain costs when searching for lines of credit and when posting credit vacancies, respectively. We also show that the presence of credit market frictions moderates the reactions of employment and wages to a monetary shock. Finally, we confirm the finding that pass-through incompleteness has limited short-term impacts on the transmission of monetary policy shocks to output and inflation.
Giuli, F., Ciccarone, G., Liberati, D. (2014). Incomplete interest rate pass-through under credit and labor market frictions. ECONOMIC MODELLING, 36(C), 645-657 [10.1016/j.econmod.2013.02.040].
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11590/138577
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