Krachs financiers ou trappe à liquidité. Le dilemme des politiques monétaires non-conventionnelles

Antonin Pottier and Gaël Giraud

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Abstract: This paper examines quantity-targeting monetary policy in a two-period economy with fiat money, endogenously incomplete markets of financial securities, backed by collateral. Non-conventional monetary policy of injecting money results in three scenarios compatible with the equilibrium conditions: 1) the economy enters a liquidity trap; 2) thanks to money creation, markets function orderly at the cost of inflation; 3) the money fuels a financial bubble whose bursting leads to debt-deflation. This dilemma of monetary policy highlights the default channel affecting trades, and provides a rigorous foundation to Fisher's debt deflation theory as being distinct from Keynes' liquidity trap.

Date: 2013-05
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Published in Revue Economique, 2013, 64 (3), pp.485-496. ⟨10.3917/reco.643.0561⟩

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Journal Article: Krachs financiers ou trappe à liquidité. Le dilemme des politiques monétaires non conventionnelles (2013)
Working Paper: Krachs financiers ou trappe à liquidité. Le dilemme des politiques monétaires non-conventionnelles (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-00800547

DOI: 10.3917/reco.643.0561

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