Credit Traps
2012 ◽
Vol 102
(6)
◽
pp. 3004-3032
◽
Keyword(s):
This paper studies the limitations of monetary policy in stimulating credit and investment. We show that, under certain circumstances, unconventional monetary policies fail in that liquidity injections into the banking sector are hoarded and not lent out. We use the term “credit traps” to describe such situations and show how they can arise due to the interplay between financing frictions, liquidity, and collateral values. We show that small contractions in monetary policy can lead to a collapse in lending. Our analysis demonstrates how quantitative easing may be useful in increasing collateral prices, bank lending, and aggregate investment. (JEL E44, E52, E58, G01)
Keyword(s):
2014 ◽
Vol 41
(6)
◽
pp. 881-906
◽
2018 ◽
Vol 13
(5)
◽
pp. 1291-1310
◽
Keyword(s):
2019 ◽
pp. 118-145
2006 ◽
Vol 45
(4II)
◽
pp. 1055-1070
◽
Keyword(s):
Keyword(s):
Keyword(s):