Interest Rates and Monetary Policy

S. Gazioglu, W. D. McCausland

Research output: Contribution to journalArticle

Abstract

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.
Original languageEnglish
Pages (from-to)2005-2012
Number of pages8
JournalApplied Economics
Volume41
Issue number16
DOIs
Publication statusPublished - 2009

Fingerprint

Interest rate policy
Monetary policy
Borrowing
Nominal exchange rate
Wisdom
Exchange rate targeting
Inflation
Nominal interest rate

Cite this

Interest Rates and Monetary Policy. / Gazioglu, S.; McCausland, W. D.

In: Applied Economics, Vol. 41, No. 16, 2009, p. 2005-2012.

Research output: Contribution to journalArticle

Gazioglu, S. ; McCausland, W. D. / Interest Rates and Monetary Policy. In: Applied Economics. 2009 ; Vol. 41, No. 16. pp. 2005-2012.
@article{873b8c18a1d44007b027860b60ca372c,
title = "Interest Rates and Monetary Policy",
abstract = "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.",
author = "S. Gazioglu and McCausland, {W. D.}",
year = "2009",
doi = "10.1080/00036840601019372",
language = "English",
volume = "41",
pages = "2005--2012",
journal = "Applied Economics",
issn = "0003-6846",
publisher = "Routledge",
number = "16",

}

TY - JOUR

T1 - Interest Rates and Monetary Policy

AU - Gazioglu, S.

AU - McCausland, W. D.

PY - 2009

Y1 - 2009

N2 - 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.

AB - 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.

U2 - 10.1080/00036840601019372

DO - 10.1080/00036840601019372

M3 - Article

VL - 41

SP - 2005

EP - 2012

JO - Applied Economics

JF - Applied Economics

SN - 0003-6846

IS - 16

ER -