Journal Article
Monetary policy and asset prices with imperfect credit markets
Abstract: The Modigliani-Miller theorem is fundamental to the theory of corporate finance. One of the theorem's immediate implications is that there is no reason for the monetary authority to respond to asset prices. This article posits a world in which the Modigliani-Miller theorem does not hold. The authors assume that the amount of an entrepreneur's external financing is limited by the amount of collateral she holds. They examine the implications for the monetary authority in such an environment.
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Bibliographic Information
Provider: Federal Reserve Bank of Cleveland
Part of Series: Economic Review
Publication Date: 2001
Issue: Q IV
Pages: 51-59