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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 that are more persistent than the initial disturbance.
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.
Consequences of Shifts in the Supply of Intermediation
A more important consequence of this extension of the model is the fact that
shifts in the XS schedu...
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