This paper develops a general equilibrium model of two traditional explanations of the monetary "black box" linking money and real activity: the liquidity effect and the loanable funds effect. These effects are modeled with a monetary production economy in which central bank injections of cash are funnelled into the economy through the credit market. As a result, only borrowers have direct access to the newly injected cash. The model has several interesting implications: 1) monetary injections cause fluctuations in asset prices for non-Fisherian reasons, 2) monetary injections increase current and future real activity, and, 3) the central bank has the ability to dampen or magnify fluctuations in real activity.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
file. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Paper provided by Northwestern University, Center for Mathematical Studies in Economics and Management Science in its series Discussion Papers with number
900.
Length: Date of creation: Apr 1990 Date of revision: Handle: RePEc:nwu:cmsems:900
Contact details of provider: Postal: Center for Mathematical Studies in Economics and Management Science, Northwestern University, 580 Jacobs Center, 2001 Sheridan Road, Evanston, IL 60208-2014 Phone: 847/491-3527 Fax: 847/491-2530 Email: Web page: http://www.kellogg.northwestern.edu/research/math/ More information through EDIRC
Order Information: Email:
For technical questions regarding this item, or to correct its listing, contact: (Fran Walker).