Liquidity, Trends and the Great Recession

Pablo A. Guerron-Quintana and Ryo Jinnai ()

No e066, Working Papers from Tokyo Center for Economic Research

Abstract: We study the impact that the liquidity crunch in 2008-2009 had on the U.S. economy's growth trend. To this end, we propose a model featuring endogenous growth "la Romer and a liquidity friction" la Kiyotaki-Moore. A key finding in our study is that liquidity declined around the demise of Lehman Brothers, which lead to the severe contraction in the economy. This liquidity shock was a tail event. Improving conditions in financial markets were crucial in the subsequent recovery. Had conditions remained at their worst level in 2008, output would have been 20 percent below its actual level in 2011.

Pages: 52 pages
Date: 2014-01
New Economics Papers: this item is included in nep-dge
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

Downloads: (external link)
https://www.tcer.or.jp/wp/pdf/e66.pdf (application/pdf)

Related works:
Working Paper: Lliquidity, trends, and the great recession (2014)
Working Paper: Liquidity, Trends and the Great Recession (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:tcr:wpaper:e66

Access Statistics for this paper

More papers in Working Papers from Tokyo Center for Economic Research Contact information at EDIRC.
Bibliographic data for series maintained by ().