Credit Frictions and Optimal Monetary Policy

Vasco Cúrdia, Michael Woodford

NBER Working Paper No. 21820
Issued in December 2015
NBER Program(s):   EFG   ME

We extend the basic (representative-household) New Keynesian [NK] model of the monetary transmission mechanism to allow for a spread between the interest rate available to savers and borrowers, that can vary for either exogenous or endogenous reasons. We find that the mere existence of a positive average spread makes little quantitative difference for the predicted effects of particular policies. Variation in spreads over time is of greater significance, with consequences both for the equilibrium relation between the policy rate and aggregate expenditure and for the relation between real activity and inflation.

Nonetheless, we find that the target criterion—a linear relation that should be maintained between the inflation rate and changes in the output gap—that characterizes optimal policy in the basic NK model continues to provide a good approximation to optimal policy, even in the presence of variations in credit spreads. Such a "flexible inflation target" can be implemented by a central-bank reaction function that is similar to a forward-looking Taylor rule, but adjusted for changes in current and expected future credit spreads.

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迈克尔·伍德福特(Michael Woodford)

1955年出生在美国马萨诸塞州，1977年获芝加哥大学学士学位，1980年获耶鲁法学院法学博士，1983年获麻省理工大学经济学博士。伍德福特曾执教于哥伦比亚大学经济系，芝加哥大学经济系和商学院以及普林斯顿大学经济系。按照中国的说法，50岁的伍德福特已经到了知天命的年龄，他在宏观经济研究领域成绩斐然。主要研究方向为：宏观经济和货币政策研究，包括定价的非完美竞争模型，货币交易机理，货币政策优化，通货紧缩和流动性陷阱，金融创新与货币政策，财政政策与通货膨胀等。他与福里德曼等人合著的《现代宏观经济学中知识、信息和预期》被视为宏观经济学中的经典著作。他长期致力于央行信息沟通与宏观经济稳定方面的研究，一系列研究成果引人关注。在伍德福特的头衔中，还有，美国艺术与科学院院士，经济政策研究中心研究员。他还担任过美国国家科学基金委员会经济学部委员，美国经济学会提名委员会委员，《经济理论》副主编。