Endogenous Financial Structure and Monetary Policy ∗

  title={Endogenous Financial Structure and Monetary Policy ∗},
  author={Edgar A. Ghossoub},
  • Edgar A. Ghossoub
  • Published 2015
The objective of this manuscript is study the linkages between the structure of the financial system and monetary policy. In contrast to previous studies with money, the stucture of the financial system is endogenously determined and depends on economic conditions. I show that as economies become more market oriented, it is optimal to set lower inflation targets in order to improve risk sharing that gets distorted by higher stock market participation. Furthermore, I demonstrate that the optimal… CONTINUE READING