Score contribution per author:
α: calibrated so average coauthorship-adjusted count equals average raw count
This paper develops a general equilibrium model of money and banking in which the central bank operates two facilities: a lending facility and a deposit facility. With aggregate uncertainty about liquidity demands, a bank exhausts its monetary reserves and borrows a central bank loan by pledging collateral in some states of nature. The model shows that changing the interest-rate corridor, defined as the difference between the lending and the deposit rates, generates responses in the bank’s portfolio choice, asset prices, welfare, and the liquidity structure of assets’ yields. The model also yields novel policy implications in a channel system.