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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...
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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 …
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