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Liquidity Effects, Monetary Policy, and the Business Cycle

Eichenbaum, Martin - 1992

This paper presents new empirical evidence to support the hypothesis that positive money supply shocks drive short-term interest rates down. We then present a quantitative, general equilibrium model which is consistent with the hypothesis. The two key features of our model are that (i) money...

Persistent link: https://www.econbiz.de/10012474841

Liquidity Effects and the Monetary Transmission Mechanism

Christiano, Lawrence J. - 1992

liquidity effects. This paper discusses the basic frictions and mechanisms underlying this new class of models and investigates … long-lasting, quantitatively significant liquidity effects, as well as persistent increases in aggregate economic activity …

Persistent link: https://www.econbiz.de/10012475008

Identification and the Liquidity Effect of a Monetary Policy Shock

Christiano, Lawrence J. - 1991

Conventional wisdom holds that unanticipated expansionary monetary policy shocks cause transient but persistent decreases in real and nominal interest rates. However a number of econometric studies argue that the evidence favors the opposite view, namely that these shocks actually raise, rather...

Persistent link: https://www.econbiz.de/10012475068

Liquidity Dependence and the Waxing and Waning of Central Bank Balance Sheets

Acharya, Viral V.; Chauhan, Rahul S.; Rajan, Raghuram Govind - National Bureau of Economic Research - 2023

in 2017, there was no commensurate shrinkage of these claims on liquidity. Consequently, the financial sector was left … more sensitive to potential liquidity shocks, with weaker-capitalized banks most exposed. This necessitated Fed liquidity … provision in September 2019 and again in March 2020. Liquidity-risk-exposed banks suffered the most drawdowns and the largest …

Persistent link: https://www.econbiz.de/10014247971

Inflation Past, Present and Future : Fiscal Shocks, Fed Response, and Fiscal Limits

Cochrane, John H. - National Bureau of Economic Research - 2022

Our current inflation stemmed from a fiscal shock. The Fed is slow to react. Why? Will the Fed's slow reaction spur more inflation? I write a simple model that encompasses the Fed's mild projections and its slow reaction, and traditional views that inflation will surge without swift rate rises....

Persistent link: https://www.econbiz.de/10013210124

Interest Rate Implications for Fiscal and Monetary Policies : A Postscript on the Government Budget Constraint

Friedman, Benjamin M. - 1982

An earlier paper by the author investigated the quantitative implications, for the effectiveness of fiscal and monetary policies, of a model treating the determination of long-term interest rates by explicitly imposing the market clearing equilibrium condition that the quantity of bonds issued...

Persistent link: https://www.econbiz.de/10012478225

The Determination of Long-Term Interest Rates : Implications for Monetary and Fiscal Policies

Friedman, Benjamin M. - 1979

The object of this paper is to bring to bear on financial-non financial interactions a richer approach to modeling the determination of long-term interest rates. in a series of previous papers. I have developed an alternative model based explicitly on the truism that any factor affecting...

Persistent link: https://www.econbiz.de/10012478782

A Fiscal Theory of Monetary Policy with Partially-Repaid Long-Term Debt

Cochrane, John H. - 2020

I construct a simple model with sticky prices and interest rate targets, closed by fiscal theory of the price level with long-term debt and fiscal and monetary policy rules. Fiscal surpluses rise following periods of deficit, to repay accumulated debt, but surpluses do not respond to arbitrary...

Persistent link: https://www.econbiz.de/10012479269

Understanding Policy in the Great Recession : Some Unpleasant Fiscal Arithmetic

Cochrane, John H. - 2010

I use the valuation equation of government debt to understand fiscal and monetary policy in and following the great recession of 2008-2009, to think about fiscal pressures on US inflation, and what sequence of events might surround such an inflation. I emphasize that a fiscal inflation can come...

Persistent link: https://www.econbiz.de/10012462568

Long-term Debt and Optimal Policy in the Fiscal Theory of the Price Level

Cochrane, John H. - 1998

The fiscal theory says that the price level is determined by the ratio of nominal debt to the present value of real primary surpluses. I analyze long-term debt and optimal policy in the fiscal theory. I find that the maturity structure of the debt matters. For example, it determines whether news...

Persistent link: https://www.econbiz.de/10012472043

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