TY: SER
T1 - Technological innovations and the interest rate
A1 - Lećo, E. R.
N2 - We build a dynamic general equilibrium model where there are banks that charge interest
for their loans to the private sector. We look at the response of the interest rate to
innovations in the banks? technology and to innovations in the nonbank firms?
technology. We find that whereas technological innovations in the nonbanking sector put
upward pressure on the interest rate, technological innovations in banks exert downward
pressure on the interest rate. This property of the model is behind our main result: in
stochastic simulation experiments where the technological shocks in banks are highly
positively correlated with the technological shocks in firms, we obtain a strong negative
correlation between the current interest rate and future values of real output. This
corresponds to what the data show us [see King and Watson (1996)].
UR - https://repositorio.iscte-iul.pt/handle/10071/489
Y1 - 2002
PB - Dināmia