Liquidity when it matters: QE and Tobin's q
The model of credit-constrained investors developed by Kiyotaki and Moore is used to analyse 'unconventional monetary policy' actions taken in the US and UK. We make two contributions. The first is expositional--to show that their model of a liquidity crisis can be represented as a two-equation dynamic system in K (the aggregate capital stock) and q (Tobin's q, the price of capital goods) with saddle-point dynamics. This allows for an intuitive, graphical exposition of the issues and results. The second is to show how a liquidity crisis leads to a deep recession when the assumption of perfect wage and price flexibility is replaced by downwardly rigid wages and prices. As in Del Negro et al., we show how central bank policies to increase liquidity can ameliorate the recession: but we use our simplified model for the purpose. Further, we analyse how fiscal intervention can help combat recession. Copyright 2013 Oxford University Press 2013 All rights reserved, Oxford University Press.
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.
Volume (Year): 65 (2013)
Issue (Month): suppl_1 (April)
|Contact details of provider:|| Postal: Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK|
Fax: 01865 267 985
Web page: http://oep.oupjournals.org/
|Order Information:||Web: http://www.oup.co.uk/journals|
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.:
- V. V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 2007.
"Business Cycle Accounting,"
Econometric Society, vol. 75(3), pages 781-836, 05.
- V. V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 2002. "Business cycle accounting," Working Papers 625, Federal Reserve Bank of Minneapolis.
- V.V. Chari & Patrick J. Kehoe & Ellen McGrattan, 2004. "Business Cycle Accounting," NBER Working Papers 10351, National Bureau of Economic Research, Inc.
- V V Chari & Patrick J Kehoe & Ellen R. McGrattan, 2003. "Business Cycle Accounting," Levine's Bibliography 506439000000000421, UCLA Department of Economics.
- V. V. Chari & Patrick Kehoe & Ellen McGrattan, 2004. "Business Cycle Accounting," Levine's Bibliography 122247000000000560, UCLA Department of Economics.
- V. V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 2006. "Business cycle accounting," Staff Report 328, Federal Reserve Bank of Minneapolis.
- Milne,Alistair, 2009. "The Fall of the House of Credit," Cambridge Books, Cambridge University Press, number 9780521762144, August.
- Nicola Gennaioli & Andrei Shleifer & Robert Vishny, 2010. "Financial Innovation and Financial Fragility," NBER Chapters,in: Market Institutions and Financial Market Risk National Bureau of Economic Research, Inc.
- Nicola Gennaioli & Andrei Shleifer & Robert Vishny, 2010. "Financial Innovation and Financial Fragility," Working Papers 2010.114, Fondazione Eni Enrico Mattei.
- Kevin C. Murdock & Thomas F. Hellmann & Joseph E. Stiglitz, 2000. "Liberalization, Moral Hazard in Banking, and Prudential Regulation: Are Capital Requirements Enough?," American Economic Review, American Economic Association, vol. 90(1), pages 147-165, March. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:oup:oxecpp:v:65:y:2013:i:suppl_1:p:i115-i145. 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: (Oxford University Press)or (Christopher F. Baum)
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.