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Working Paper

Monetary Policy in a World Without Perfect Capital Markets

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This working paper examines a theoretical model in which an entrepreneur's net worth affects his ability to finance current activity. Net worth, in turn, is determined by asset prices, which can be affected by monetary policy. In this environment, the central bank plays a welfare-improving role by responding to asset price and technology shocks.
10.01.2001ISSN 2573-7953 WP 01-15DOI 10.26509/frbc-wp-200115
Keywords General equilibrium, money and interest rates, monetary policy
JEL Classification Codes D51, E42, E52

Working Papers of the Federal Reserve Bank of Cleveland are preliminary materials circulated to stimulate discussion and critical comment on research in progress. They may not have been subject to the formal editorial review accorded official Federal Reserve Bank of Cleveland publications. The views expressed in this paper are those of the authors and do not represent the views of the Federal Reserve Bank of Cleveland or the Federal Reserve System.

Suggested Citation

Carlstrom, Charles T., and Timothy S. Fuerst. 2001. “Monetary Policy in a World Without Perfect Capital Markets.” Federal Reserve Bank of Cleveland, Working Paper No. 01-15. https://doi.org/10.26509/frbc-wp-200115