Does the Liquidity Trap Exist?

Lhuissier, Stéphane; Mojon, Benoı̂t; Rubio-Ramı́rez, Juan Francisco

doi:10.2139/ssrn.3578357

Cited by 9 publications

(6 citation statements)

References 37 publications

(51 reference statements)

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“…We conduct our analysis as follows. In the first step, we focus on the period of the effective (zero) lower bound, starting with 2012 Q2 and ending in 2014 Q4, the eve of the year of US monetary policy liftoff (Lhuissier et al, 2019). Given the binding effective lower bound, we use shadow interest rates from Krippner (2016) to capture the stance of post-crisis unconventional policy.…”

Section: Introductionmentioning

confidence: 99%

How does the interaction of macroprudential and monetary policies affect cross-border bank lending?

Takáts

Temesváry

2019

FEDS

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We combine a rarely accessed BIS database on bilateral cross-border lending flows with crosscountry data on macroprudential regulations. We study the interaction between the monetary policy of major international currency issuers (USD, EUR and JPY) and macroprudential policies enacted in source (home) lending banking systems. We find significant interactions. Tighter macroprudential policy in a home country mitigates the impact on lending of monetary policy of a currency issuer. For instance, macroprudential tightening in the UK mitigates the negative impact of US monetary tightening on USD-denominated cross-border bank lending outflows from UK banks. Vice-versa, easier macroprudential policy amplifies impacts. The results are economically significant.

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Section: Introductionmentioning

confidence: 99%

How does the interaction of macroprudential and monetary policies affect cross-border bank lending?

Takáts

Temesváry

2019

FEDS

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“…For some of them, an increase in the money supply won't make a difference when interest rates are nearly zero. Titus and Titus (2022), Mwange (2022), Francis et al (2020), Lhuissier et al (2020), andMitchell (2020) have recently examined this, which has been known as a liquidity trap since Keynes (1936). In such a scenario, agents favour liquidity over debt during economic downturns; that is, businesses and households would rather hoard cash than take out credit to use for purchases or investments.…”

Section: Empirical Literature Reviewmentioning

confidence: 99%

Does Nigeria’s Growth in Education Increase with Expansionary Monetary Policy?

Ihugba,

Ebomuche,

Akobundu

et al. 2024

WJER

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This study investigated whether expansionary monetary policy contributed to Nigeria’s educational growth through cointegration using the auto-regressive distributed lag (ARDL) method for the years 1981–2021. The bounds tests indicate that the variables of interest are long-term correlated. The corresponding equilibrium correction supported the existence of a long-term relationship. The findings also show that, in the short run, there is no Granger causality between interest rates, inflation, and education growth. Empirical analysis reveals a highly significant relationship between these macroeconomic variables and the growth of education. Furthermore, the findings show that the high interest rate won’t have a significant impact on low-income Nigerians because Nigeria’s private sector receives relatively little domestic credit. The paper recommends that the government develop and implement policies that ensure favourable interest rates for financing education. This could entail offering grants, scholarships, or low-interest student loans in order to increase the accessibility and affordability of education.

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“…Bibow cites Keynes' liquidity preference theory as a highly relevant theory. He also saw it as a way to assess the phenomena of the 2008 global financial crisis (Lhuissier et al 2020).…”

Section: Introductionmentioning

confidence: 99%

Inhomogeneous Financial Markets in a Low Interest Rate Environment—A Cluster Analysis of Eurozone Economies

Tatay

Orlovits

Novák

2022

Risks

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In the present paper, we investigate the financial homogeneity of the euro area economies by contrasting eurozone countries’ responses to monetary policy steps to the theoretical assumptions of the liquidity trap phenomenon. Our assumption is that the euro area economies are not completely homogeneous. Hence, in a zero-interest rate environment, the asset holding decisions of economic agents exhibit detectable differences across countries. We verify our assumptions using Eurostat data. We use the financial asset stocks of the euro area countries to cluster the countries concerned. Previous literature has not examined changes in the ratio of financial assets to GDP, nor differences in structural changes in the total stock of financial assets under the zero lower bound. The paper uses k-centers cluster analysis based on Euclidean distance for detecting changes in the portfolio holdings of eurozone economic actors owing to economic crises and monetary policy responses. The results confirm that euro area financial markets are fragmented. There are significant differences across asset markets of different Eurozone countries, both during and after the crisis. Despite some similarities in the portfolio rearrangement across countries, the ECB’s monetary policy does not have a uniform impact on euro area financial markets, and notable differences prevail in the financial asset structures of the economies concerned.

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Does the Liquidity Trap Exist?

Cited by 9 publications

References 37 publications

How does the interaction of macroprudential and monetary policies affect cross-border bank lending?

How does the interaction of macroprudential and monetary policies affect cross-border bank lending?

Does Nigeria’s Growth in Education Increase with Expansionary Monetary Policy?

Inhomogeneous Financial Markets in a Low Interest Rate Environment—A Cluster Analysis of Eurozone Economies

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