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President George W. Bush is preparing a drastic permanent reduction in federal income and estate taxes. He cites as precedents tax cuts by Kennedy-Johnson 1962-64 and Reagan 1981. In those cases, however, the economy was operating well below full employment and needed a "demand-side" stimulus...
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rates, bond risks, and liquidity explain the trends before 2008 and the unusual developments in the fall of 2008. Low …
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, then the economy will fall into a liquidity trap today. …
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The possibility of default limits available liquidity. If the potential default draws nearer, a liquidity crisis may … endogenous contracts, including endogenous margin requirements on loans. This in turn allows GE to explain liquidity and … liquidity crises in equilibrium. A formal definition of liquidity is presented. When new information raises the probability and …
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There has been a widespread perception in the past few years that long-term asset prices are generally high because monetary authorities have effectively kept long-term interest rates, which the market uses to discount cash flows, low. This perception is not accurate. Long-term interest rates...
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