Coordination, Fragility, High-Powered Money, and the Liquidity Trap: A "Tobinesque" Parable
This 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.
Volume (Year): 31 (2005)
Issue (Month): 1 (Winter)
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