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Liquidity and real equilibrium interest rates: a framework of analysis

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  • Stracca, Livio

Abstract

This paper proposes a general equilibrium model with heterogeneous households and a financial market where each financial instrument provides liquidity services in addition to enabling a transfer of purchasing power over time. Importantly, liquidity services may be asymmetric according to whether the financial instrument is held as an asset or as a liability, and are also agentspecific. The main purpose of the study is to develop an analytical framework and a language for evaluating the effect of (broadly defined) liquidity factors on equilibrium rates of return and intertemporal allocation. JEL Classification: E40, E43

Suggested Citation

  • Stracca, Livio, 2005. "Liquidity and real equilibrium interest rates: a framework of analysis," Working Paper Series 542, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:2005542
    Note: 335958
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    File URL: https://www.ecb.europa.eu//pub/pdf/scpwps/ecbwp542.pdf
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    References listed on IDEAS

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    Cited by:

    1. Trenca Ioan & Balogh Peter & Mutu Simona, 2013. "A Macroprudential Supervision Model. Empirical Evidence From The Central And Eastern European Banking System," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(1), pages 1133-1141, July.

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    More about this item

    Keywords

    financial market; heterogeneity.; liquidity services; Real interest rates;
    All these keywords.

    JEL classification:

    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects

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