Liquidity Models in Open Economies: Theory and Empirical Evidence

Nouriel Roubini () and Vittorio Grilli

No 5313, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper presents an overview of recent theoretical and empirical research on 'liquidity models' in open economies; this is a class of optimizing models where money has effects on real asset prices and economic activity without relying on the 'ad-hoc' assumption of price/wage stickiness. The non-neutrality of money derives from a temporary segmentation between goods and asset markets. After surveying the theoretical literature on liquidity models, we present empirical evidence based on VAR econometric techniques for the seven major industrial countries. Such evidence is shown to be consistent with the main implications of the liquidity models.

JEL-codes: E52 F41 (search for similar items in EconPapers)
Date: 1995-10
Note: IFM
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

Published as European Economic Review, 40, pp.847-859, 1996.

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Journal Article: Liquidity models in open economies: Theory and empirical evidence (1996)
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