Woodford

Question 1

What is the problem of woodford?

Answer 1

Why standard macro models that are abstract from fin intermediation and including bank lending channel are unable to explain the crisis?

Question 2

Main claim of the article

Answer 2

1. We need models with fin mediation a crucial role

2. Market based fin structure

Question 3

classical monetarist view of crisis and the problem

Answer 3

• concerns
• funds are withdrawn
• money supply decreases
• lower econ activity + deflation
• money demand decreases
  The problem is:
  FED suddenly reacts to decrease in supply, but crisis still occur

Question 4

models of bank landing channel and the problems

Answer 4

The channel:
decrease discount rate –> increase credits
use reserve requirements for a binding constraint
The problems:
- the main source of funds is no more domestic deposits
- borrowers have other sorces than banks

Question 5

What is securitization?

Answer 5

Transform the illiquid assets to securities

Question 6

Market based approach to fin markets

Answer 6

LS-LD curve between i and L
Y increases –> LS to right, LD to left,
i decreases, L increases
IS-MP curve between i and Y

Question 7

Construction of Financial Market Structure

Answer 7

Multiple i's:
 i_s and i_b
i_b-i_s=w: fin markets playground
XS-XD curve with w and L
(Y increases --> XS right, i_s decreases --> XS right)