TITLE:
Political Intervention and Monetary Transmission: A Theoretical Note
AUTHORS:
Saibal Ghosh
KEYWORDS:
Politics, Bank Lending, Monetary Policy, Jawboning
JOURNAL NAME:
Theoretical Economics Letters,
Vol.12 No.2,
April
11,
2022
ABSTRACT: Within a theoretical framework, the paper analyzes
the impact of government intervention in the credit market on bank lending. The
results indicate that in the short-run, a monetary expansion lowers lending
that is not susceptible to political intervention by a magnitude that is higher
than loans that are impacted by political
influence. In the long run, a monetary expansion is observed to
uniformly raise bank lending, consistent with the jawboning hypothesis.