Financial intermediation and credit spreads

  • João Brogueira de Sousa (Student)

Student thesis: Master's Thesis


This dissertation presents the numerical solution of the model developed in Correia, I., F. De Fiore, P. Teles, O. Tristani (2012). In this framework, financial intermediation takes place with private intermediaries facing endogenously determined balance sheet constraints. I compute the approximate solution of the problem of a Ramsey planner in response to several exogenous shocks. The response to these shocks under optimal policy isolates the financial sector from the rest of the economy so that the financing cost of firms does not increase and allocations are not distorted. Furthermore, I show that for a given price level on impact there is always a nominal interest rate path that satisfies the financial constraint and replicates the first best allocations. In this framework, indeterminacy in price level leads to multiple solutions for the optimal nominal interest rate policy.
Date of Award21 Feb 2013
Original languageEnglish
Awarding Institution
  • Universidade Católica Portuguesa
SupervisorPedro Teles (Supervisor)


  • Financial intermediation
  • Financial frictions
  • Credit costs
  • Optimal


  • Mestrado em Economia

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