By introducing search and matching frictions in both the labor and the credit markets into a cash in advance New Keynesian DSGE model, we provide a novel explanation of the incomplete pass-through from policy rates to loan rates. We show that this phenomenon is ineradicable if banks possess some power in the bargaining over the loan rate of interest, if the cost of posting job vacancies is positive and if firms and banks sustain costs when searching for lines of credit and when posting credit vacancies, respectively. We also show that the presence of credit market frictions moderates the reactions of employment and wages to a monetary shock. Finally, we confirm the finding that pass-through incompleteness has limited short-term impacts on the transmission of monetary policy shocks to output and inflation. (C) 2013 Elsevier B.V. All rights reserved.

Incomplete interest rate pass-through under credit and labor market frictions / Ciccarone, Giuseppe; Francesco, Giuli; Danilo, Liberati. - In: ECONOMIC MODELLING. - ISSN 0264-9993. - STAMPA. - 36:(2014), pp. 645-657. [10.1016/j.econmod.2013.02.040]

Incomplete interest rate pass-through under credit and labor market frictions

CICCARONE, Giuseppe;
2014

Abstract

By introducing search and matching frictions in both the labor and the credit markets into a cash in advance New Keynesian DSGE model, we provide a novel explanation of the incomplete pass-through from policy rates to loan rates. We show that this phenomenon is ineradicable if banks possess some power in the bargaining over the loan rate of interest, if the cost of posting job vacancies is positive and if firms and banks sustain costs when searching for lines of credit and when posting credit vacancies, respectively. We also show that the presence of credit market frictions moderates the reactions of employment and wages to a monetary shock. Finally, we confirm the finding that pass-through incompleteness has limited short-term impacts on the transmission of monetary policy shocks to output and inflation. (C) 2013 Elsevier B.V. All rights reserved.
2014
credit market frictions; interest rate pass-through; labor search; monetary policy
01 Pubblicazione su rivista::01a Articolo in rivista
Incomplete interest rate pass-through under credit and labor market frictions / Ciccarone, Giuseppe; Francesco, Giuli; Danilo, Liberati. - In: ECONOMIC MODELLING. - ISSN 0264-9993. - STAMPA. - 36:(2014), pp. 645-657. [10.1016/j.econmod.2013.02.040]
File allegati a questo prodotto
Non ci sono file associati a questo prodotto.

I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.

Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11573/523443
 Attenzione

Attenzione! I dati visualizzati non sono stati sottoposti a validazione da parte dell'ateneo

Citazioni
  • ???jsp.display-item.citation.pmc??? ND
  • Scopus 6
  • ???jsp.display-item.citation.isi??? 5
social impact