Liquidity Preference and Financial Intermediation
AbstractThe authors examine the characteristics of optimal monetary policies in a general equilibrium model with incomplete markets. Markets are incomplete because of uninsured preference uncertainty and because productive capital is traded infrequently. Rational individuals are willing to hold a liquid asset--'money'--at a premium. Monetary policy interacts with existing financial institutions to determine this premium, as well as the level of precautionary holdings. The authors show that inflation is expansionary and that the optimal inflation rate is positive if there is no operative banking system (the Tobin effect). Otherwise, efficiency requires that money be undominated in its rate of return. Copyright 1998 by The Review of Economic Studies Limited.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Wiley Blackwell in its journal Review of Economic Studies.
Volume (Year): 65 (1998)
Issue (Month): 3 (July)
Contact details of provider:
Web page: http://www.blackwellpublishing.com/journal.asp?ref=0034-6527
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Teles, Pedro & Uhlig, Harald, 2010.
"Is Quantity Theory Still Alive?,"
CEPR Discussion Papers
8049, C.E.P.R. Discussion Papers.
- Margarita Samartín, 2004. "Algunos Temas Relevantes En La Teoría Bancaria," Documentos de Trabajo de EconomÃa de la Empresa db040403, Universidad Carlos III, Departamento de Economía de la Empresa.
- Dutta, Jayasri & Kapur, Sandeep, 2002.
"Default and efficient debt markets,"
Journal of Mathematical Economics,
Elsevier, vol. 38(1-2), pages 249-270, September.
- Bhattacharya, Joydeep & Haslag, Joseph & Martin, Antoine, 2009.
"Optimal Monetary Policy and Economic Growth,"
Staff General Research Papers
12413, Iowa State University, Department of Economics.
- Ioannis Lazopoulos, 2005. "Cycles And Banking Crisis," Money Macro and Finance (MMF) Research Group Conference 2005 15, Money Macro and Finance Research Group.
- POLEMARCHAKIS, Heracles M. & ROCHON, Céline, 1999. "Debt, liquidity and dynamics," CORE Discussion Papers 1999034, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.