Intertemporal Substitution and the Liquidity Effect in a Sticky Price Model

Javier Andrés (), López-Salido, J. David and Javier Vallés

Banco de España Working Papers from Banco de España

Abstract: The liquidity effect, defined as a decrease in nominal interest rates in response to a monetary expansion, is a major stylized fact of the business cycle. This paper seeks to understand under what conditions such an effect can be explained in a general equilibrium model with sticky prices and capital adjustment costs.

Keywords: BUSINESS CYCLES; PRICES; ECONOMIC MODELS; GENERAL EQUILIBRIUM (search for similar items in EconPapers)
JEL-codes: E31 E32 D50 (search for similar items in EconPapers)
Date: Written
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Related works:
Working Paper: Intertemporal Substitution and the Liquidity Effect in a Sticky Price Model (2000)
Journal Article: Intertemporal substitution and the liquidity effect in a sticky price model (2002)
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Persistent link: http://EconPapers.repec.org/RePEc:bde:wpaper:9919

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