Persistent Liquidity Effects and Long-Run Money Demand

• 成果类型: Article
• 署名作者: Alvarez, Fernando; Lippi, Francesco
• 署名单位: University of Chicago; University of Sassari
• 刊物名称: AMERICAN ECONOMIC JOURNAL-MACROECONOMICS
• ISSN/ISSBN: 1945-7707
• DOI: 10.1257/mac.6.2.71
• 发表日期: 2014
• 页码: 71-107
• 关键词: monetary-policy; interest-rates; exchange-rates; asset markets; PARTICIPATION; substitution; MODEL

摘要

We present a monetary model with segmented asset markets that implies a persistent fall in interest rates after a once-and-for-all increase in liquidity. The gradual propagation mechanism produced by our model is novel in the literature. We provide an analytical characterization of this mechanism, showing that the magnitude of the liquidity effect on impact, and its persistence, depend on the ratio of two parameters: the long-run interest rate elasticity of money demand and the intertemporal substitution elasticity. The model simultaneously explains the short-run instability of money demand estimates as well as the stability of long-run interest-elastic money demand.