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Creator: Lagos, Ricardo and Zhang, Shengxing Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 734 Abstract:
We provide empirical evidence of a novel liquidity-based transmission mechanism through which monetary policy influences asset markets, develop a model of this mechanism, and assess the ability of the quantitative theory to match the evidence.
Palavra-chave: Liquidity, Monetary transmission, Monetary policy, and Asset prices Sujeito: G12 - Asset Pricing; Trading Volume; Bond Interest Rates, D83 - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness, and E52 - Monetary Policy
Creator: Bianchi, Javier and Bigio, Saki Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 503 Abstract:
We develop a new tractable model of banks' liquidity management and the credit channel of monetary policy. Banks finance loans by issuing demand deposits. Because loans are illiquid, deposit transfers across banks must be settled with reserves. Deposit withdrawals are random, and banks manage liquidity risk by holding a precautionary buffer of reserves. We show how different shocks affect the banking system by altering the trade-off between profiting from lending and incurring greater liquidity risk. Through various tools, monetary policy affects the real economy by altering that trade-off. In a quantitative application, we study the driving forces behind the decline in lending and liquidity hoarding by banks during the 2008 financial crisis. Our analysis underscores the importance of disruptions in interbank markets followed by a persistent decline in credit demand.
Palavra-chave: Liquidity, Monetary policy, Banks, and Capital requirements Sujeito: G10 - General Financial Markets: General (includes Measurement and Data), E52 - Monetary Policy, E51 - Money Supply; Credit; Money Multipliers, and E44 - Financial Markets and the Macroeconomy
Creator: Christiano, Lawrence J. and Eichenbaum, Martin S. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 478 Descrição:
This technical appendix supports "Liquidity Effects, Monetary Policy, and the Business Cycle" in Journal of Money, Credit and Banking (November 1995, Vol. 27, No. 4, Pt. 1, pp. 1113-1136), https://doi.org/10.2307/2077793.
Palavra-chave: Appendix, Computations, MATLAB, Monetary policy, Business cycles, Liquidity, and Mathematical computations Sujeito: E32 - Business Fluctuations; Cycles, Y10 - Data: Tables and Charts, and E52 - Monetary Policy
Creator: Lagos, Ricardo Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 373 Abstract:
I develop an asset-pricing model in which financial assets are valued for their liquidity—the extent to which they are useful in facilitating exchange—as well as for being claims to streams of consumption goods. The implications for average asset returns, the equity-premium puzzle and the risk-free rate puzzle, are explored in a version of the model that nests the work of Mehra and Prescott (1985).
Palavra-chave: Liquidity, Asset Pricing, Equity Premium, Risk-Free Rate, and Exchange Sujeito: G12 - Asset Pricing; Trading Volume; Bond Interest Rates, D42 - Market Structure, Pricing, and Design: Monopoly, and E52 - Monetary Policy
Creator: Cole, Harold Linh, 1957- and Ohanian, Lee E. Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 246 Abstract:
Many economists have worried about changes in the demand for money, since money demand shocks can affect output variability and have implications for monetary policy. This paper studies the theoretical implications of changes in money demand for the nonneutrality of money in the limited participation (liquidity) model and the predetermined (sticky) price model. In the liquidity model, we find that an important connection exists between the nonneutrality of money and the relative money demands of households and firms. This model predicts that the real effect of a money shock rose by 100 percent between 1952 and 1980, and subsequently declined 65 percent. In contrast, we find that the nonneutrality of money in the sticky price model is invariant to changes in money demands or other monetary factors. Several researchers have concluded from VAR analyses that the effects of money shock over time are roughly stable. This view is consistent with the predictions of the sticky price model, but is harder to reconcile with the specific pattern of time variation predicted by the liquidity model.
Palavra-chave: Liquidity, Sticky prices, Money shocks, and Velocity Sujeito: E32 - Business Fluctuations; Cycles, E52 - Monetary Policy, and E41 - Demand for Money