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Liquidity, Welfare and Distribution

Author

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  • Samuel Gil Martín

Abstract

This work presents a dynamic general equilibrium model where wealth distribution is endogenous. I provide channels of causality that suggest a complex relationship between financial markets and the real activity which breaks down the classical dichotomy. As a consequence, the Friedman rule does not hold. In terms of the current events taking place in the world economy, this paper provides a rationale to advert against the perils of an economy satiated with liquidity. Efficiency and distribution cannot thus be considered as separate attributes once we account for the interactions between financial markets and the economic performance. Key words: Friedman rule, Idiosyncratic risk, Liquidity.JEL: E22, E31, E40.

Suggested Citation

  • Samuel Gil Martín, 2012. "Liquidity, Welfare and Distribution," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 59(2), pages 217-234.
    • Handle: RePEc:voj:journl:v:59:y:2012:i:2:p:217-234:id:345
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    More about this item

    Keywords

    Friedman rule; Idiosyncratic risk; Liquidity;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General

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