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Moreover if a disturbance leads to an increase or

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Unformatted text preview: celerator” accelerator” effects. Bernanke and Gertler (1995) discuss evidence for the importance tance of such effects in the case of monetary policy shocks. Moreover, if a disturbance leads to an increase or decrease in the capital of the intermediary sector, the altered level of capital is likely to persist for some time. This can result in effects on economic activity activity that are more persistent than the initial disturbance. The The presence of an upward-sloping XS curve (representing credit frictions) essentially makes the IS curve steeper, and consequently acts to dampen the effects on aggregate output of disturbances that shift the MP curve, to the extent that the XS schedule is not itself shifted by the disturbances. In fact, however, the XS schedule may well shift, in which case the net effect may well be to amplify output fluctuations, rather than to dampen them. uctuations, Consequences of Shifts in the Supply of Intermediation A more important consequence of this extension of the model is the fact that more shifts in the XS schedu...
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This note was uploaded on 11/23/2013 for the course ECON 11837649 taught by Professor Batchelder during the Spring '10 term at Pepperdine.

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