Liquidity, loanable funds, and real activity

Fuerst, Timothy S.

doi:10.1016/0304-3932(92)90021-s

Cited by 404 publications

(272 citation statements)

References 6 publications

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“…Classical examples include Friedman (1959) and Goldfeld (1973Goldfeld ( , 1976. This may explain why CIA constraints on both consumption and investment are widely used in the theoretical monetary literature, such as Stockman (1981), Abel (1985) and Fuerst (1992), to name just a few.…”

Section: Introductionmentioning

confidence: 99%

Another look at sticky prices and output persistence

Wang

Wen

2006

Journal of Economic Dynamics and Control

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Price rigidity is the key mechanism for propagating business cycles in traditional Keynesian theory. Yet the New Keynesian literature has failed to show that sticky prices by themselves can e¤ectively propagate business cycles in general equilibrium. We show that price rigidity in fact can (by itself) give rise to a strong propagation mechanism of the business cycle in standard New Keynesian models, provided that investment is also subject to a cash-in-advance constraint.In particular, we show that reasonable price stickiness can generate highly persistent, humpshaped movements in output, investment and employment in response to either monetary or non-monetary shocks, even if investment is only partially cash-in-advance constrained. Hence, whether or not price rigidity is responsible for output persistence (and the business cycle in general) may not be a theoretical question, but an empirical one.

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Section: Introductionmentioning

confidence: 99%

Another look at sticky prices and output persistence

Wang

Wen

2006

Journal of Economic Dynamics and Control

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“…It is more closely intertwined with the financial markets of the economy (Fuerst, 1992;Brunnermeier, 2008;Naes, Skjeltorp, & Odegaard, 2011). Market liquidity is a function of the information flow (Glosten & Milgrom, 1985;Klibanoff, Lamont, & Wizman, 1998), trading rules (Amihud & Mendelson, 1988), and sentiments of market participants (Baker & Stein, 2004;Chen, Hong, & Stein, 2002).…”

Section: Introductionmentioning

confidence: 99%

Macroeconomic Stress, Equity Market Liquidity Spirals and Markov Regime Switching

Mishra

Tripathy

2015

IJEF

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This paper makes an attempt to identify the periods of high illiquidity spiral and loss spiral fitting into Markov switching regimes model with Constant Transition Probability and Time-Varying Transition Probability models in US equity market. We identified two different states of the illiquidity spiral and loss spiral in the data associated with the said variables under the CPT and TVTP. However the time-varying transition probabilities for illiquidity spiral and loss spiral have changed significantly during the period under analysis and the explanatory variables are very informative in dating the evolution of the state of the illiquidity spiral and loss spiral over a period of 27 years starting with 1983. Hence TVTP model is preferred over the CTP model in identifying the illiquidity spiral and loss spiral regime switching. In particular, the probability of remaining in the high illiquidity spiral and high loss spiral regimes increases with a decrease in S&P 500 return.

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“…The characteristic assumption is that some households never participate in financial markets. Occhino (2004) argues that the segmented markets model displays more persistence than other limited participation models, like the models in Grossman and Weiss (1983), Lucas (1990), Fuerst (1992), and Christiano and Eichenbaum (1992), where households do not participate in financial markets only temporarily. Also, Occhino (2003) shows that, differently from representative agents monetary models, the segmented markets model can replicate the persistent decrease of the aggregate output growth rate, and the persistent increase of the real interest rate, which follow a contractionary monetary policy shock.…”

Section: Introductionmentioning

confidence: 99%

Existence of Equilibrium for Segmented Markets Models with Interest Rate Monetary Policies

Occhino

2006

Contributions in Theoretical Economics

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Liquidity, loanable funds, and real activity

Cited by 404 publications

References 6 publications

Another look at sticky prices and output persistence

Another look at sticky prices and output persistence

Macroeconomic Stress, Equity Market Liquidity Spirals and Markov Regime Switching

Existence of Equilibrium for Segmented Markets Models with Interest Rate Monetary Policies

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