Monetary Policy Without a Frozen Aggregate Supply Curve. A Literature Review..

  • Tomasz Serwach Uniwersytet Łódzki

Abstrakt

Purpose - The article reviews the literature on the interactions between aggregate demand and aggregate supply and discusses the relevance of the presented mechanisms for the current economic situation, especially due to the ongoing monetary tightening in major economies.


Research method The article is based on the study of the existing literature on the linkages between aggregate demand and aggregate supply shocks.


Results – According to the presented models it is especially heightened level of corporate debt that makes firms more vulnerable to financial shocks, including an unexpected increase in interest rates. As a result, tight credit conditions (due to monetary tightening) may translate into a decline of not only aggregate demand, but also aggregate supply with ambiguous effects for the general price level and inflation rates.


Originality /value / implications /recommendations - The review summarizes a broad, but currently heavily overlooked literature on the links between aggregate demand disturbances and shocks to aggregate supply. The originality of the paper stems from an attempt to present that literature with the relevance to the ongoing increases in policy interest rates in various economies in the world.

Bibliografia

Acemoglu D., 2009, Introduction to Modern Economic Growth, Princeton University Press, Princeton, New Jersey.
Acharya V.V., Steffen S., 2020, The Risk of Being a Fallen Angel and the Corporate Dash for Cash in the Midst of COVID, ”The Review of Corporate Finance Studies”, vol 9(3), pp. 430-471, DOI: 10.1093/rcfs/cfaa013
Agarwal R., Kimball M., 2022, Will Inflation Remain High?, “Finance and Development”, vol. 2/2022 (June), pp. 24-31.
Aikman D, Drehmann M., Juselius M., Xing X., 2022, The scarring effects of deep contractions, BIS Working Papers No 1043, Basel.
Barth M.J., Ramey V.A. The Cost Channel of Monetary Transmission [in:] NBER Macroeconomics Annual 2001, Bernanke B.S., Rogoff K. (eds.), MIT Press, Cambridge, Massachusetts.
Benigno G., Fornaro L., 2018, Stagnation traps, “Review of Economic Studies”, vol. 85(3), pp. 14251470, DOI: 10.1093/restud/rdx063.
Bernanke B.S. 1995, Inside the Black Box: The Credit Channel of Monetary Policy Transmission, “Journal of Economic Perspectives”, vol. 9(4) ,pp. 27-48, DOI: 10.1257/jep.9.4.27.
Blanchard O.J., Quah D., 1989. The Dynamic Effects of Aggregate Demand and Supply Disturbances, “American Economic Review’’, vol. 79(4), pp. 655-673, DOI: 10.3386/w2737.
Blanchard O.J., Cerutti E., Summers L., 2015, Inflation and Activity – Two Explorations and their Monetary Policy Implications, IMF Working Paper Np. 15/230, Washington, DC.
Blinder A.S., 1987, Credit Rationing and Effective Supply Failures, “The Economic Journal”, vol. 97(386), pp. 327-352, DOI: 10.2307/2232882.
Brzoza-Brzezina M., Makarski K., 2011, Credit crunch in a small open economy, “Journal of International Money and Finance”, vol. 30(7), pp. 1406-1428, DOI: 10.1016/j.jimonfin.2011.07.010
Brzoza-Brzezina M., Kolasa M., Makarski K., 2013, The anatomy of standard DSGE models with financial frictions, “Journal of Economic Dynamics and Control”, vol. 37(1), pp. 32-51, DOI: 10.1016/j.jedc.2012.06.008.
Chodorow-Reich G., Darmouni O., Luck S., Plosser M., 2021, Bank liquidity provision across the firm size distribution, “Journal of Financial Economics”, vol. 144(3), pp. 908-932, DOI: 10.1016/j.jfineco.2021.06.035.
Fornaro L., Wolf M., 2020, Covid-19 Coronavirus and Macroeconomic Policy, Barcelona GSE Working Paper Series Working Paper No. 1168, Barcelona.
Furlanetto F., Lepetit A., Robstad Ø., Rubio-Ramirez J.F., Ulvedal P., 2021, Estimating Hysteresis Effects, Finance and Economics Discussion Paper No. 2021-059, Federal Reserve Board, Washington, DC.
Guerrieri V., Lorenzoni G., Straub L., Werning I., 2022. Macroeconomic Implications of COVID-19: Can Negative Supply Shocks Cause Demand Shortages?, “American Economic Review”, vol. 112(5), pp. 1437-1474, DOI: 10.1257/aer.20201063.
Greenwald D.L., Krainer J., Paul P., 2020, The Credit Line Channel, Federal Reserve Bank of San Francisco Working Paper 2020-26, San Francisco, California.
Kienzler D., Schmid K.D., 2013, Monetary policy and hysteresis in potential output, University of Tübingen Working Papers in Economics and Finance No. 55, Tübingen.
Kiyotaki N., Moore J., 1997, Credit Cycles, “Journal of Political Economy”, vol. 105(2), pp. 211-248, DOI: 10.1086/262072.
Manea C., 2020, Monetary Policy with Financially-Constrained and Unconstrained Firms, Universitat Pompeu Fabra mimeo.
Murphy K.M., Shleifer A., Vishny R.W., 1989, Industrialization and the Big Push, “Journal of Political Economy”, vol. 97(5), pp. 1003-1026, DOI: 10.1086/261641.
Romer D., 1996, Advanced Macroeconomics, First Edition, McGraw-Hill, New York City, New York.
Romer D., 2018, Advanced Macroeconomics, Fifth Edition, McGraw-Hill, New York City, New York.
Opublikowane
2023-11-13
Jak cytować
Dział
Studia i rozprawy