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Federal Reserve Bank of Cleveland
Working Papers (Old Series)
Monetary policy in a world without perfect capital markets
Charles T. Carlstrom
Timothy S. Fuerst
Abstract

This working paper examines a theoretical model in which an entrepreneur’s net worth affects his ability to finance current activity. Net worth, in turn, is determined by asset prices, which can be affected by monetary policy. In this environment, the central bank plays a welfare-improving role by responding to asset price and technology shocks.


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Charles T. Carlstrom & Timothy S. Fuerst, Monetary policy in a world without perfect capital markets, Federal Reserve Bank of Cleveland, Working Papers (Old Series) 0115, 2001.
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Keywords: Monetary policy ; Interest rates
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Fed-in-Print is the central catalog of publications within the Federal Reserve System. It is managed and hosted by the Economic Research Division, Federal Reserve Bank of St. Louis.

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