Credit subsidies

Isabel Correia; Fiorella de Fiore; Pedro Teles; Oreste Tristani

doi:10.1016/j.jmoneco.2018.12.002

Credit subsidies

Isabel Correia^*, Fiorella de Fiore^*, Pedro Teles^*, Oreste Tristani^*

^*Corresponding author for this work

Research output: Contribution to journal › Article › peer-review

6 Citations (Scopus)

Abstract

Credit subsidies are an alternative to interest rate and credit policies when dealing with high and volatile credit spreads. In a model where credit spreads move in response to shocks to the net worth of financial intermediaries, credit subsidies are able to stabilize those spreads avoiding repercussions on the real economy. Interest rate policy can be a substitute for credit subsidies but it is limited by the zero bound constraint. Credit subsidies overcome this constraint. They are superior to a policy of credit easing as long as the government is less efficient than financial intermediaries in providing credit.

Original language	English
Pages (from-to)	2-14
Number of pages	13
Journal	Journal of Monetary Economics
Volume	118
DOIs	https://doi.org/10.1016/j.jmoneco.2018.12.002
Publication status	Published - Mar 2021

Keywords

Banks
Costly enforcement
Credit subsidies
Monetary policy
Zero lower bound on nominal interest rates

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

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10.1016/j.jmoneco.2018.12.002

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title = "Credit subsidies",

abstract = "Credit subsidies are an alternative to interest rate and credit policies when dealing with high and volatile credit spreads. In a model where credit spreads move in response to shocks to the net worth of financial intermediaries, credit subsidies are able to stabilize those spreads avoiding repercussions on the real economy. Interest rate policy can be a substitute for credit subsidies but it is limited by the zero bound constraint. Credit subsidies overcome this constraint. They are superior to a policy of credit easing as long as the government is less efficient than financial intermediaries in providing credit.",

keywords = "Banks, Costly enforcement, Credit subsidies, Monetary policy, Zero lower bound on nominal interest rates",

author = "Isabel Correia and Fiore, {Fiorella de} and Pedro Teles and Oreste Tristani",

year = "2021",

month = mar,

doi = "10.1016/j.jmoneco.2018.12.002",

language = "English",

volume = "118",

pages = "2--14",

journal = "Journal of Monetary Economics",

issn = "0304-3932",

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TY - JOUR

T1 - Credit subsidies

AU - Correia, Isabel

AU - Fiore, Fiorella de

AU - Teles, Pedro

AU - Tristani, Oreste

PY - 2021/3

Y1 - 2021/3

N2 - Credit subsidies are an alternative to interest rate and credit policies when dealing with high and volatile credit spreads. In a model where credit spreads move in response to shocks to the net worth of financial intermediaries, credit subsidies are able to stabilize those spreads avoiding repercussions on the real economy. Interest rate policy can be a substitute for credit subsidies but it is limited by the zero bound constraint. Credit subsidies overcome this constraint. They are superior to a policy of credit easing as long as the government is less efficient than financial intermediaries in providing credit.

AB - Credit subsidies are an alternative to interest rate and credit policies when dealing with high and volatile credit spreads. In a model where credit spreads move in response to shocks to the net worth of financial intermediaries, credit subsidies are able to stabilize those spreads avoiding repercussions on the real economy. Interest rate policy can be a substitute for credit subsidies but it is limited by the zero bound constraint. Credit subsidies overcome this constraint. They are superior to a policy of credit easing as long as the government is less efficient than financial intermediaries in providing credit.

KW - Banks

KW - Costly enforcement

KW - Credit subsidies

KW - Monetary policy

KW - Zero lower bound on nominal interest rates

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DO - 10.1016/j.jmoneco.2018.12.002

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SN - 0304-3932

VL - 118

SP - 2

EP - 14

JO - Journal of Monetary Economics

JF - Journal of Monetary Economics

ER -

Credit subsidies

Abstract

Keywords

UN SDGs

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CUBE: Católica Lisbon Research Unit in Business and Economics

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Credit subsidies

Abstract

Keywords

UN SDGs

Access to Document

Other files and links

Fingerprint

Projects

CUBE: Católica Lisbon Research Unit in Business and Economics

Cite this