The Tragedy of the Commons and Inflation Bias in the Euro Area
Central bank credit has expanded dramatically in some of the Euro Area member countries since the beginning of the financial crisis. This paper makes two contributions to understand this stylized fact. First, we discuss a simple model of monetary policy that includes (i) a credit channel and (ii) a...
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| Veröffentlicht in: | Open economies review 2014-02, Vol.25 (1), p.71-91 |
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| creator | Dinger, Valeriya Steinkamp, Sven Westermann, Frank |
| description | Central bank credit has expanded dramatically in some of the Euro Area member countries since the beginning of the financial crisis. This paper makes two contributions to understand this stylized fact. First, we discuss a simple model of monetary policy that includes (i) a credit channel and (ii) a common pool problem in a monetary union. We illustrate that the interaction of the two elements leads to an inflation bias that is independent of the standard time-inconsistency bias. Secondly, we present an institutional analysis that is consistent with the view of fragmented monetary policy and empirical evidence that illustrates the heterogeneity of central bank credit expansion. |
| doi_str_mv | 10.1007/s11079-013-9300-x |
| format | Article |
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| subjects | Bias Central banks Collateral Credit market Decision making Development Economics Economic crisis Economic models Economic Policy Economic statistics Economic theory Economics Economics and Finance Empirical research Euromarkets European Integration Eurozone Externality Financial crisis Inflation International Economics International finance Jurisdiction Macroeconomics/Monetary Economics//Financial Economics Monetary policy Monetary theory Monetary unions Money markets Research Article Studies |
| title | The Tragedy of the Commons and Inflation Bias in the Euro Area |
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