Journal article

Publication year: 2009

Pages: 941-953

Journal: Journal of International Money and Finance

Volume number: 28

Issue number: 6

DOI Link: https://doi.org/10.1016/j.jimonfin.2008.10.003

Publisher: Elsevier

Abstract: 

This paper studies the time-varying role of the cost channel of monetary transmission, i.e. the supply-side effect of monetary policy based on firms' costs of holding working capital. For that purpose, we provide rolling-window estimates of an augmented New Keynesian Phillips curve and show that the cost channel exhibits important time-varying dynamics. We find, as a general pattern, that the cost channel was most important in the pre-Volcker period and less important in the Volcker–Greenspan era. Recently, however, the cost channel regained importance. Since the cost channel is based on the transmission of policy impulses through bank lending, it is likely that the time-varying cost channel reflects the cyclical nature of financial frictions.

Harvard Citation style: Tillmann, P. (2009) The time-varying cost channel of monetary transmission, Journal of International Money and Finance, 28(6), pp. 941-953. https://doi.org/10.1016/j.jimonfin.2008.10.003

APA Citation style: Tillmann, P. (2009). The time-varying cost channel of monetary transmission. Journal of International Money and Finance. 28(6), 941-953. https://doi.org/10.1016/j.jimonfin.2008.10.003