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Liquidity Shortages and Monetary Policy
Cao, Jin; Illing, Gerhard - 2021
The paper models the interaction between risk taking in the financial sector and central bank policy for the case of pure illiquidity risk. It is shown that, when bad states are highly unlikely, public provision of liquidity may improve the allocation, even though it encourages more risk taking...
Persistent link: https://www.econbiz.de/10013316591
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Optimal Stabilization Policy with Flexible Prices
Berentsen, Aleksander - 2013
fully flexible and money is essential for trade. Our main result is that if the central bank pursues a long-run price path …
Persistent link: https://www.econbiz.de/10012754424
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Endogenous Systemic Liquidity Risk
Cao, Jin - 2013
Traditionally, aggregate liquidity shocks are modelled as exogenous events. Extending our previous work (Cao & Illing, 2008), this paper analyses the adequate policy response to endogenous systemic liquidity risk. We analyse the feedback between lender of last resort policy and incentives of...
Persistent link: https://www.econbiz.de/10013095988
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Banking Panics and Liquidity in a Monetary Economy
Matsuoka, Tarishi - 2018
This paper studies banks' liquidity provision in the Lagos and Wright model of monetary exchanges. With aggregate uncertainty we show that banks sometimes exhaust their cash reserves and fail to satisfy their depositors' need of consumption smoothing. The banking panics can be eliminated by the...
Persistent link: https://www.econbiz.de/10012930807
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Superneutrality of Money Under Open Market Operations
Homburg, Stefan - 2015
does not hold in such a setting. However, the standard results rely on the counter-factual premise of helicopter money and … are overturned if money creation through open market operations is taken into account. This result suggests that a more …
Persistent link: https://www.econbiz.de/10013026679
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Money Creation and Destruction
Faure, Salomon - 2017
We study money creation and destruction in today's monetary architecture within a general equilibrium setting. Two … types of money are created and destructed: bank deposits, when banks grant loans to firms or to other banks, and central … bank money, when the central bank grants loans to private banks. We show that symmetric equilibria yield the first …
Persistent link: https://www.econbiz.de/10012950289
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The Quantity Theory of Money and Friedmanian Monetary Policy : An Empirical Investigation
Hillinger, Claude - 2013
We introduce an approach for the empirical study of the quantity theory of money (QTM) that is novel both with respect … directly on the relationship between the rate of change of the money stock and inflation. We believe that this is an inferior …
Persistent link: https://www.econbiz.de/10013091422
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Is Optimal Monetary Policy Always Optimal?
Davig, Troy - 2015
No. And not only for the reason you think. In a world with multiple inefficiencies the single policy tool the central bank has control over will not undo all inefficiencies; this is well understood. We argue that the world is better characterized by multiple inefficiencies and multiple policy...
Persistent link: https://www.econbiz.de/10013017379
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Outside Versus Inside Bonds : A Modigliani-Miller Type Result for Liquidity Constrained Economies
Berentsen, Aleksander - 2010
When agents are liquidity constrained, two options exist - sell assets or borrow. We compare the allocations arising in two economies: in one, agents can sell government (outside) bonds and in the other they can borrow by issuing (inside) bonds. All transactions are voluntary, implying no...
Persistent link: https://www.econbiz.de/10013135267
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The ECB's Fiscal Policy
Sinn, Hans‐Werner - 2018
While the ECB helped mitigate the euro crisis in the aftermath of Lehman, it has stretched its monetary mandate and moved into fiscal territory. This text describes and summarises the crucial role played by the ECB in the intervention spiral resulting from its bid to manage the crisis. It also...
Persistent link: https://www.econbiz.de/10012916355