Aguiar, Alvaro; Drumond, Inês - Money Macro and Finance Research Group - 2007
This paper improves the analysis of the role of financial frictions in the transmission of monetary policy, by bringing … adequacy regulations and households' preferences for liquidity. Detailing a dynamic new Keynesian general equilibrium model, in … which households require a (countercyclical) liquidity premium to hold bank capital, we find that the introduction of bank …