The macroeconomic response to the economic crisis has revived old debates about the usefulness of monetary and fiscal policy in fighting recessions. Without the ability to further lower interest rates, policy authorities in many countries have turned to expansionary fiscal policies. Recent literature argues that government spending may be very effective in such environments. But a critical elem...

The paper compares the main monetary policy strategies to assess which one is best performing in terms of both minimising volatility inflation and output-gap reducing probability falling into a liquidity trap. differ degree history dependence are assessed by means three-equation New Keynesian DSGE model, estimated with Bayesian methods on euro area data. Only optimal rules considered for each s...

This paper develops a sequential random matching model of asset trading to analyze how the extent of information about an asset that is available in the market can affect its tradeability. Liquidity traders are rational agents with higher impatience, which make optimal intertemporal consumption decisions given the trading constraints. Information asymmetries result in unexecuted trades. Agents ...

Liquidity risk management ranks to key concepts applied in finance. Liquidity is defined as a capacity to obtain funding when needed, while liquidity risk means as a threat to this capacity to generate cash at fair costs. In the paper we present challenges of liquidity risk management resulting from the 20072009 global financial upheaval. We see five main regulatory liquidity risk management is...

Should one think of zero nominal interest rates as an undesirable liquidity trap or as the desirable Friedman rule? I use three different frameworks to discuss this issue. First, I restate H. L. Cole and N. Kocherlakota’s (1998, Fed. Res. Bank Minn. Quart. Rev., Spring, 2–10) analysis of Friedman’s rule: short run increases in the money stock—whether through issuing spending coupons, open marke...

Considerable anecdotal evidence suggests that the effects of liquidity shocks spread quickly throughout the financial sector. However, few studies have focused on the dynamics of liquidity across real-estate markets. This paper examines the liquidity spill-over impact across four markets linked by a common fundamental factor : the stock market, the derivative (Credit Default Swap (CDS)) market,...