Get a unique, high-quality and non-plagiarized paper from us today at the most affordable price
Email us : premieredtutorials@gmail.com

monetary transmission mechanism which are based on asymmetric information.

Q) Explain them monetary transmission mechanism which are based on asymmetric information. Explain their operational effectiveness in normal economic times in the United States and in the United Kingdom. Were these channels operationally effective during the financial crisis of 2008?
(Before you start writing you should understand the bank lending channel, bank capital channel and the balance sheet channel.
Try to understand how they work during normal times – read the lecture note and the papers provided in the class. )
During the crisis period Fed and BoE took expansionary policy, so monetary policy rate was low. If bank lending channel (BLC) operated then banks would give more loans and output would increase. But in reality it did not happen. Before the crisis most of the banks in UK and US dependent on short term funds from the money market and on securitization for funding and less on insured deposits. Thus during the financial crisis when asset prices and house prices went down and there was high uncertainty in the money market banks did not lend to each other so banks could not get funds to generate loans. Thus even though central banks took expansionary policy commercial banks did not increase loans. The reasons might be due to
1) During the financial crisis when asset prices and house prices went down and there was high uncertainty in the money market banks did not lend to each other so banks could not get funds to generate loans.
2) High uncertainty between the borrower and the lender.

You can measure uncertainty in the money market by looking at the difference between
Libor rate – monetary policy rate. The difference between the two is the risk premium.

If uncertainty is high this difference will be high. If the BLC worked properly then the difference/risk premium should be low and banks cost of getting funds will be low. But in reality during the crisis premium was high , so banks had to pay extra money to get their funding. So lending might have decreased.
Looking at the balance sheet channel (BSC) it did not work properly. Because of the crisis firm and individuals financial net worth went down (because house price went down andbecause stock prices went down). This made them financially more distressed, So if they wanted a bank loan banks would charge them more for the loan because now more uncertainty is involved. You can measure this by looking at the difference between the lending rate/mortgage rate-monetary policy rate. If the channel worked properly it would have gone down because and people and firms would get more loans and output would increase.

You can get these data from Fed and BoE and IFS websites or Datastream
(the links are in the module handbook)

Place your order now for a similar paper and have exceptional work written by our team of experts to guarantee you A Results

Why Choose US

6+ years experience on custom writing
80% Return Client
Urgent 2 Hrs Delivery
Your Privacy Guaranteed
Unlimited Free Revisions

How to Place an Order 

Send the assignment details such as the instructions, due date/deadline, number of pages and college level to the customer support agent online on live chat,  fill in the assignment details at place an order or send the information to our email address premieredtutorials@gmail.com and a customer support agent will respond to you immediately. 

Once you place your order, we choose for you the best and competent writer for your assignment based on each writer’s competence in handling a subject. 

When the homework is completed, we have a quality assurance team that proofreads the assignment to ensure it meets the required rubric instructions from your professor.

After thorough review of your assignment, we send the paper to the client. In case you need any changes at this point, you can let us know so that we can handle it for you at no extra charge. 

Homework Help Website

Why we should write your Paper 

  1. Money Return guarantee
  2. 0% Plagiarism Rate
  3. Guaranteed Privacy
  4. Written from scratch by highly qualified writers 
  5. Communication at Any Time (24/7)
  6. Flexible Pricing and Great Discount Programs
  7. Timely Deliveries
  8. Free Amendments
Looking for a similar assignment and in urgent need for help? Place your order and have excellent work written by our team of professionals to ensure you acquire the best grades.

  We are here to assist you.

 

Statistics about Us

130 New Projects
235 Projects in Progress
315 Inquiries
420 Repeat clients

© 2021 Premiered Tutorials
All rights reserved. We provide online custom written papers, such as term papers, research papers, thesis papers, essays, dissertations and other custom writing services.

All papers inclusive of research material are strictly intended to be used for research and study purposes only. Premiered Tutorials does not support or condone plagiarism in any form. These custom papers should be used with proper reference.

Place an Order
error: Content is protected !!