Article ID Journal Published Year Pages File Type
5059894 Economics Letters 2012 5 Pages PDF
Abstract

Comparing Bernanke et al.'s (1999) financial accelerator model to a comparable model without an operational financial accelerator mechanism, we find that financial acceleration is reduced when monetary policy reacts to the output gap and when firm-specific volatility rises.

► We examine the external finance premium model when output is included in the monetary policy rule. ► Financial acceleration is lower if the central bank responds to output. ► In recessions, when firm-specific volatility rises, financial acceleration is further reduced.

Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
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