SCIENCE@home

Financial Intermediation and Macroeconomic Analysis

Michael Woodford

Published 2010 in Journal of Economic Perspectives

ABSTRACT

a macroeconomic framework in which fi nancial intermediation matters for the allocation of resources. allocation of resources. In this paper, I fi rst discuss why neither standard macroeconomic models that In this paper, I fi rst discuss why neither standard macroeconomic models that abstract from fi nancial intermediation nor traditional models of the "bank lending abstract from fi nancial intermediation nor traditional models of the "bank lending channel" are adequate as a basis for understanding the recent crisis. I argue that channel" are adequate as a basis for understanding the recent crisis. I argue that instead we need models in which intermediation plays a crucial role, but in which instead we need models in which intermediation plays a crucial role, but in which intermediation is modeled in a way that better conforms to current institutional intermediation is modeled in a way that better conforms to current institutional realities. In particular, we need models that recognize that a market-based fi nan- realities. In particular, we need models that recognize that a market-based fi nan- cial system—one in which intermediaries fund themselves by selling securities in cial system—one in which intermediaries fund themselves by selling securities in competitive markets, rather than collecting deposits subject to reserve require- competitive markets, rather than collecting deposits subject to reserve require- ments—is not the same as a frictionless system. ments—is not the same as a frictionless system. I then sketch the basic elements of an approach that allows fi nancial inter- I then sketch the basic elements of an approach that allows fi nancial inter- mediation and credit frictions to be integrated into macroeconomic analysis in a mediation and credit frictions to be integrated into macroeconomic analysis in a straightforward way. I show how the model can be used to analyze the macroeco- straightforward way. I show how the model can be used to analyze the macroeco- nomic consequences of the recent fi nancial crisis and conclude with a discussion of nomic consequences of the recent fi nancial crisis and conclude with a discussion of some implications of the model for the conduct of monetary policy. some implications of the model for the conduct of monetary policy.

PUBLICATION RECORD

CITATION MAP

EXTRACTION MAP

CLAIMS

  • No claims are published for this paper.

CONCEPTS

  • No concepts are published for this paper.

REFERENCES

Showing 1-56 of 56 references · Page 1 of 1

CITED BY

Showing 1-100 of 292 citing papers · Page 1 of 3

123
Next