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Financial frictions, durable goods and monetary policy

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Bibliographic Details
Authors and Corporations: Emenogu, Ugochi T. (Author), Michelis, Leo (Author)
Other Authors: Michelis, Leo [Author]
Type of Resource: E-Book
Language: English
published:
[Ottawa] Bank of Canada [2019]
Series: Bank of Canada: Staff working paper ; 2019, 31 (August 2019)
Subjects:
Source: Verbunddaten SWB
Lizenzfreie Online-Ressourcen
Description
Summary: This paper examines the effect of financial frictions on the consumption of durables and non-durables in a two-sector dynamic stochastic general equilibrium (DSGE) model with sticky prices and heterogeneous agents. The financial frictions are a combination of loanto- value (LTV) and payment-to-income (PTI) constraints faced by borrowers. In this setting, a monetary contraction drastically reduces the maximum amount consumers can borrow to purchase durable goods. As a result, the model predicts that the consumption of durables falls, along with non-durables, even when durable prices are fully flexible. Also, output falls and the nominal interest rate increases following monetary tightening. Thus, our model's predictions better match the data than models in existing literature.
Physical Description: 1 Online-Ressource (circa 28 Seiten); Illustrationen