Coordination, Fragility, High-Powered Money, and the Liquidity Trap: A "Tobinesque" Parable
AbstractThis paper provides a simple model of fragility in which recession, triggered by demand for high-powered money, generates a liquidity trap. Moreover, in this liquidity trap parable, it is its assured store of value that is the critical attribute of high-powered money and not, perhaps, "liquidity services" per se at all. Thus, a rather "Tobinesque" liquidity trap is portrayed. The crucial ingredients in the model are simple, standard forms of production complementarities.
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Bibliographic InfoArticle provided by Eastern Economic Association in its journal Eastern Economic Journal.
Volume (Year): 31 (2005)
Issue (Month): 1 (Winter)
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Find related papers by JEL classification:
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
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- Bryant, John, 1983. "A Simple Rational Expectations Keynes-Type Model," The Quarterly Journal of Economics, MIT Press, vol. 98(3), pages 525-28, August.
- George Evans & Seppo Honkapohja & Paul Romer, 1996.
NBER Working Papers
5659, National Bureau of Economic Research, Inc.
- James McAndrews & William Roberds, 1999.
"Payment intermediation and the origins of banking,"
85, Federal Reserve Bank of New York.
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