Bank liquidity preference and the investment demand constraint
Aggregate bank liquidity preference is postulated to engender an investment demand constraint. This idea is integrated into a stochastic dynamic structural macroeconomic model to study output and inflation fluctuations. The model has two regimes that allows for examining output and inflation adjustments over time given a change in commercial bank mark-up lending rate, quantitative easing and stochastic output shocks. The two financial regimes are: (i) an investment demand constraint regime; and (ii) a bank liquidity trap regime. The time adjustment of output and inflation given a change in mark-up lending rate and monetary easing depends on the financial regime in which the economy finds itself. Adjustments owing to stochastic output shocks do not depend on the financial regime. The nature of the regime is determined by the level of the mark-up lending rate and its strength of adjustment over time relative to the competitive loanable funds rate.
If 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.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Dani Rodrik & Arvind Subramanian, 2009. "Why Did Financial Globalization Disappoint?," IMF Staff Papers, Palgrave Macmillan, vol. 56(1), pages 112-138, April.
- Gauti B. Eggertsson & Jonathan David Ostry, 2005. "Does Excess Liquidity Pose a Threat in Japan?," IMF Policy Discussion Papers 05/5, International Monetary Fund.
- Charles Goodhart & Boris Hofmann, 2005.
"The IS curve and the transmission of monetary policy: is there a puzzle?,"
Taylor & Francis Journals, vol. 37(1), pages 29-36.
- Charles Goodhart & Boris Hofmann, 2003. "The IS Curve and the Transmission of Monetary Policy: Is there a Puzzle?," FMG Special Papers sp150, Financial Markets Group.
- Goodhart, Charles A. E. & Hofmann, Boris, 2003. "The IS curve and the transmission of monetary policy: Is there a puzzle?," ZEI Working Papers B 13-2003, ZEI - Center for European Integration Studies, University of Bonn.
- Magnus Saxegaard, 2006. "Excess Liquidity and the Effectiveness of Monetary Policy; Evidence From Sub-Saharan Africa," IMF Working Papers 06/115, International Monetary Fund.
- Poghosyan, Tigran, 2013.
"Financial intermediation costs in low income countries: The role of regulatory, institutional, and macroeconomic factors,"
Elsevier, vol. 37(1), pages 92-110.
- Tigran Poghosyan, 2012. "Financial Intermediation Costs in Low-Income Countries; The Role of Regulatory, Institutional, and Macroeconomic Factors," IMF Working Papers 12/140, International Monetary Fund.
- Stiglitz, Joseph E, 1989. "Financial Markets and Development," Oxford Review of Economic Policy, Oxford University Press, vol. 5(4), pages 55-68, Winter.
- Haughton, Andre Yone & Iglesias, Emma M., 2012. "Interest rate volatility, asymmetric interest rate pass through and the monetary transmission mechanism in the Caribbean compared to US and Asia," Economic Modelling, Elsevier, vol. 29(6), pages 2071-2089.
- Petrevski, Goran & Bogoev, Jane, 2012. "Interest rate pass-through in South East Europe: An empirical analysis," Economic Systems, Elsevier, vol. 36(4), pages 571-593.
- Todd Keister & James McAndrews, 2009.
"Why are banks holding so many excess reserves?,"
380, Federal Reserve Bank of New York.
- Tarron Khemraj, 2010. "What does excess bank liquidity say about the loan market in Less Developed Countries?," Oxford Economic Papers, Oxford University Press, vol. 62(1), pages 86-113, January.
- Ryu-ichiro Murota & Yoshiyasu Ono, 2009.
"Zero Nominal Interest Rates, Unemployment, Excess Reserves and Deflation in a Liquidity Trap,"
ISER Discussion Paper
0748, Institute of Social and Economic Research, Osaka University.
- Ryu‐ichiro Murota & Yoshiyasu Ono, 2012. "Zero Nominal Interest Rates, Unemployment, Excess Reserves And Deflation In A Liquidity Trap," Metroeconomica, Wiley Blackwell, vol. 63(2), pages 335-357, 05.
When requesting a correction, please mention this item's handle: RePEc:eee:ecmode:v:33:y:2013:i:c:p:977-990. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
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.