Liquidity, Asset Prices and Financial Policy
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منابع مشابه
Liquidity, Interest, and Asset Prices *
A stylized theory of money and central banking is added to a model of competitive equilibrium in asset markets to explain the determination of the general level of asset prices and interest rates. The cash-in-advance constraint provides a transactions demand for money, but this is not sufficient to guarantee the determinacy of the price level if liquidity is costless or the price level is uncer...
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Monetary policy works through changes in asset prices – especially through its impact on long-term interest rates. As well as affecting the economy through the usual ‘IS’ relationships – through consumption and investment – monetary policy has wider repercussions. It affects balance sheets through changes in the relative prices of liabilities and assets, the availability of credit and through p...
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In contrast with the financial multiplier literature, this note explores a case in which the shock triggering a financial crisis stems from the financial sector itself; it is not a shock stemming from the real sector which gets amplified by, say, agency problems. The micro foundations are provided by the bank run literature epitomized by the seminal paper by Diamond and Dybvig (1983). Financial...
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In recent years there has been a resurgence of research on the transmission of monetary policy through the financial system, fueled in part by empirical findings showing that monetary policy affects asset prices and the financial system in ways not explained by the New Keynesian paradigm. In particular, monetary policy appears to impact risk premia in stock and bond prices, and to effectively c...
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