-Wicksellian paradigm. A general form of an aggregate-demand equation reveals a role for liquidity, as well as less effective movements in …

We propose a new framework for monetary policy analysis to study monetary policy normalization when exiting a liquidity … trap. The optimal combination of reserves and interest rate policy requires an increase in liquidity (reserves) a few … tightening starts before the liftoff of the policy rate. Moreover, the withdrawal of liquidity takes place at a very slow pace …