Discussion Paper Series Credit Market Imperfections and the Monetary Transmission Mechanism Part I : Fixed Exchange Rates

  • Peter J. Montiel
  • Published 2006

Abstract

This paper develops a simple static model with credit market imperfections and flexible prices for monetary policy analysis in a fixedexchange rate economy. Lending rates are set as a premium over the cost of borrowing from the central bank. The premium itself depends on firms’ net worth. In the basic framework, banks’ funding sources are perfect… (More)

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