Abstract :
We developaquantitativemonetaryDSGEmodelwithfinancialintermediariesthat
face endogenouslydeterminedbalancesheetconstraints.Wethenusethemodelto
evaluatetheeffectsofthecentralbankusingunconventionalmonetarypolicyto
combatasimulatedfinancialcrisis.Weinterpretunconventionalmonetarypolicyas
expandingcentralbankcreditintermediationtooffsetadisruptionofprivatefinancial
intermediation.Withinourframeworkthecentralbankislessefficientthanprivate
intermediariesatmakingloansbutithastheadvantageofbeingabletoelastically
obtain fundsbyissuingrisklessgovernmentdebt.Unlikeprivateintermediaries,itisnot
balance sheetconstrained.Duringacrisis,thebalancesheetconstraintsonprivate
intermediariestighten,raisingthenetbenefitsfromcentralbankintermediation.These
benefitsmaybesubstantialevenifthezerolowerboundconstraintonthenominal
interest rateisnotbinding.Intheeventthisconstraintisbinding,though,thesenet
benefitsmaybesignificantlyenhanced.
