Macro, Money and Finance: A Continuous Time Approach

Markus Brunnermeier and Yuliy Sannikov

No 22343, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper puts forward a teaching manual for how to set up and solve a continuous time model that allows one to analyze endogenous (1) level and risk dynamics. The latter includes (2) tail risk and crisis probability as well as (3) the Volatility Paradox. Concepts such as (4) illiquidity and liquidity mismatch, (5) endogenous leverage, (6) the Paradox of Prudence, (7) undercapitalized sectors (8) time-varying risk premia, and (9) the external funding premium are part of the analysis. Financial frictions also give rise to an endogenous (10) value of money.

JEL-codes: C63 E32 E41 E44 E51 G01 G11 G20 (search for similar items in EconPapers)
Date: 2016-06
New Economics Papers: this item is included in nep-mac and nep-mon
Note: AP CF IFM ME
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Citations: View citations in EconPapers (17)

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Working Paper: Macro, Money and Finance: A Continuous Time Approach (2016)
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