Liquidity, Business Cycles, and Monetary Policy

Nobuhiro Kiyotaki and John Moore

No 17934, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The paper presents a model of a monetary economy where there are differences in liquidity across assets. Money circulates because it is more liquid than other assets, not because it has any special function. There is a spectrum of returns on assets, reflecting their differences in liquidity. The model is used, first, to investigate how aggregate activity and asset prices fluctuate with shocks to productivity and liquidity; second, to examine what role government policy might have through open market operations that change the mix of assets held by the private sector. With its emphasis on liquidity rather than sticky prices, the model harks back to an earlier interpretation of Keynes (1936), following Tobin (1969).

JEL-codes: E10 E44 E50 (search for similar items in EconPapers)
Date: 2012-03
New Economics Papers: this item is included in nep-cba, nep-dge, nep-mac and nep-mon
Note: EFG ME
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (204)

Published as Nobuhiro Kiyotaki & John Moore, 2019. "Liquidity, Business Cycles, and Monetary Policy," Journal of Political Economy, vol 127(6), pages 2926-2966.

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Related works:
Working Paper: Liquidity, Business Cycles and Monetary Policy (2012)
Working Paper: Liquidity, Business Cycles, and Monetary Policy (2008)
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