Liquidity Trap and Excessive Leverage
نویسندگان
چکیده
منابع مشابه
Leverage and the Financial Accelerator in a Liquidity Trap
The recent recession in the US saw an unusually large and persistent decline in output, low inflation and deflation, significant house price declines, and short term interest rates near zero. Much discussion of this episode has centered around financial markets and the high leverage positions at the onset of the recession. In this paper, we analyze the role of leverage in determining the proper...
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The economic situation in a wide range of economies in the wake of the crisis that began in 2007 is characterised by many as a liquidity trap. The original conceptualization of the liquidity trap was part of Keynes’s (1936) theory of liquidity preference. It referred to a situation where the monetary authorities could not reduce the nominal long-term interest rate any further by selling bonds b...
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Any recession by definition is associated with an excessive liquidity preference. An ex ante excess supply of goods and services, i.e. the demand for goods and services falling short of the base output at the base prices corresponding to that output, which is what a recession is, must be associated with an ex ante excess demand for money at that output and prices. This is simply Walras’ Law. Th...
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I discuss some simple microfoundations for Liquidity Deflation, a concept put forward in Calvo (2016 a and b), which can give rise to liquidity trap conditions under perfectly flexible prices. Unlike in Keynes (1936), this is a Supply Side Liquidity Trap. Moreover, modeling the policy interest rate as the rate of return on money-like instruments à la Calvo and Végh (1995), denoted by i!, I show...
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In standard solutions, the new-Keynesian model produces a deep recession with deflation in a liquidity trap. The model also makes unusual policy predictions: Useless government spending, technical regress, and capital destruction have large multipliers. These predictions become larger as prices become less sticky. I show that both data and policy predictions are strongly affected by equilibrium...
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ژورنال
عنوان ژورنال: American Economic Review
سال: 2016
ISSN: 0002-8282
DOI: 10.1257/aer.20140289