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Liquidity, Interbank Market, and Capital Formation

Author

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  • Tarishi Matsuoka

    () (Graduate School of Economics, Kyoto University)

Abstract

This paper presents a monetary model that links interbank markets to capital accumulation and growth. The purpose of this paper is to study how interbank markets affect real economic activities, and to find the monetary policy implications. The model shows that, in a stationary equilibrium, the economy with interbank markets attains higher capital stock than the economy without the markets, because of precautionary money savings. In addition, I find that inflationary policy is more desirable in the economy without well-functioning interbank markets.

Suggested Citation

  • Tarishi Matsuoka, 2010. "Liquidity, Interbank Market, and Capital Formation," KIER Working Papers 704, Kyoto University, Institute of Economic Research.
  • Handle: RePEc:kyo:wpaper:704
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    File URL: http://www.kier.kyoto-u.ac.jp/DP/DP704.pdf
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    More about this item

    Keywords

    overlapping generations; random relocation; inflation; interbank markets;

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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