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Home | Events Archive | Productivity Fluctuation, Bank Lending and Nominal Interventions on Product Markets
Seminar

Productivity Fluctuation, Bank Lending and Nominal Interventions on Product Markets


  • Series
    Macro Seminars
  • Speaker(s)
    Tianxi Wang (University of Essex, United Kingdom)
  • Field
    Macroeconomics
  • Location
    Tinbergen Institute Amsterdam, room 1.01
    Amsterdam
  • Date and time

    October 20, 2022
    16:00 - 17:15

Abstract: Typically, central banks intervene with asset markets. This paper shows that if the productivity fluctuation is sufficiently large, the following nominal intervention on a product market is non-neutral: Whenever the negative productivity shock hits, the central bank produces fiat money to buy the product; and later retires money via product-money exchanges. The intervention increases the nominal price fluctuation and the bad-state profit margin of bank lending. The two have opposite effects for efficiency. The net effect depends on how the intervention is wound down. Furthermore, banks' money creation reduces lending rates by leveraging up the return to holding fiat money. (single authored paper).

Link to paper.