The Use of Credit Ceilings in the Presence of Indirect Monetary Instruments: An Analytical Framework

Author/Editor:

Plamen Yossifov

Publication Date:

December 1, 2002

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

In this paper, we introduce credit ceilings in the standard model of the money multiplier and analyze their role in central bank's management of money supply in the presence of indirect monetary instruments. We show that under a regime of total credit ceilings, their optimal value equals the desired growth rate of the adjusted monetary base. Under a regime of partial credit ceilings, their optimal value depends on the desired growth rate of the adjusted monetary base, the degree of substitutability between the regulated and unregulated types of banks' earning assets, and the autonomous growth rate of the latter.

Series:

Working Paper No. 2002/206

Subject:

Banking Commercial banks Credit Credit ceilings Monetary base

English

Publication Date:

December 1, 2002

ISBN/ISSN:

9781451874617/1018-5941

Stock No:

WPIEA2062002

Pages:

16

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