Do Fixed Exchange Rates Fetter Monetary Policy?
Author InfoBurton A. Abrams (University of Delaware) Russell F. Settle (Western Washington University) Abstract The Bernanke-Blinder credit-view model is expanded to encompass a small, open economy with fixed exchange rates. In contrast to conventional wisdom and traditional models, monetary policy is resurrected as a stabilization tool. We show that various financial sector shocks have real aggregate demand effects. Further, we demonstrate that independent monetary policy actions can have substantive impacts on aggregate demand despite perfect capital mobility in bond markets and adherence to a fixed exchange rate regime as long as bank loans are imperfectly mobile. Download InfoTo download: If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient
