Interest rates and monetary policy

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Date

2009-01-01

Author

Gazioglu, S.
McCausland, W. D.

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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.

Subject Keywords

Economics and Econometrics

URI

https://hdl.handle.net/11511/64913

Journal

APPLIED ECONOMICS

DOI

https://doi.org/10.1080/00036840601019372

Collections

Department of Economics, Article

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Citation Formats

S. Gazioglu and W. D. McCausland, “Interest rates and monetary policy,” APPLIED ECONOMICS, pp. 2005–2012, 2009, Accessed: 00, 2020. [Online]. Available: https://hdl.handle.net/11511/64913.