Money and liquidity effects: Separating demand from supply

Chadha, Jagjit S.; Corrado, Luisa; Sun, Qi

doi:10.1016/j.jedc.2010.06.020

Cited by 23 publications

(17 citation statements)

References 24 publications

(26 reference statements)

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“…To analyze the liquidity-output nexus during economic recoveries we extend the theoretical framework of Chadha et al (2010). We analyze the demand and supply drivers of liquidity levels and growth in the economy.…”

Section: Modelmentioning

confidence: 99%

Anatomy of credit-less recoveries

Corrado

Rossi

2019

Journal of Macroeconomics

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Section: Modelmentioning

confidence: 99%

Anatomy of credit-less recoveries

Corrado

Rossi

2019

Journal of Macroeconomics

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“…Cauchy-Schwarz inequality implies that a Canova and Pappa (2007) and Mountford and Uhlig (2009) apply a similar identification scheme to study the effects of fiscal policy, and Chadha, Corrado and Sun (2010) among others, apply sign restrictions in a monetary policy framework. not want to be too restrictive in my choice of restrictions following just one DSGE model, since that would reduce the marginal contribution of data to my model.…”

Section: Identification Schemementioning

confidence: 99%

What is the Fiscal Stress in Euro Area? Evidence from a Joint Monetary-Fiscal Structural Model

Gerba

2018

ESPE

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I examine the importance of fiscal policy in stabilizing the Euro Area economy and the degree of interaction with monetary policy. The results provide solid evidence of a common fiscal reaction in the monetary union despite the lack of a formal fiscal union. I identify area-wide shocks and find statistically significant (endogenous) responses of fiscal policies to shocks. I also find strong evidence for interactions between fiscaland monetary policy. Said that, the nature of interactions depends very much on the shocks that hit the economy. At the same time, the way the two fiscal policies interact with monetary policy is also different and independent of each other. Furthermore, the spending multiplier is higher than the tax multiplier. Nonetheless, their relative efficacy has changed over time, with the spending (tax) multiplier falling (rising) since the onset of the Great Recession. To conclude, there are considerable differences in the nature of Euro Area monetary-fiscal interactions compared to the US. Not only are the impulse responses to different shocks significantly different, but also the fiscal multipliers vary a lot. Keynesian (or spending-oriented) fiscal policy is more effective in expanding output in the Euro Area while tax reductions are more effective in the US.

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“…A way to incorporate money and …nancial spreads into a general equilibrium setting is to study the banking sector proposed by Goodfriend and McCallum (2007). 10 The main feature of the model is the inclusion of a banking sector alongside households, production and the monetary authority. The model by GM complements the traditional accelerator e¤ect (Bernanke et al, 1999) with an attenuator e¤ect, which is present in the model because monitoring e¤ort is drawn into the banking sector in response to the expansion of consumption, which is accompanied by an expansion of bank lending that raises the marginal cost of loans and the external …nance premium.…”

Section: A General Equilibrium Monetary Model With Banking and Creditmentioning

confidence: 99%

A Note on Money and the Conduct of Monetary Policy

2013

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Prior to the financial crisis, mainstream monetary policy practice had become disconnected from money. We outline the basic rationale for this development using a simple model of money and credit in which we explore the conditions under which money matters directly for the conduct of policy. Then, using a DSGE model, we examine the circumstances under which money becomes more closely linked to inflation. We find that money matters when the variance of the supply of lending dominates productivity and the velocity of money demand. This is because amplifying the role of loans supply leads to an expansion in aggregate demand, via a compression of the external finance premium, which is inflationary. We consider a number of alternative monetary policy rules, and find that a rule which exploits the joint information from money and the external finance premium performs best.

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Money and liquidity effects: Separating demand from supply

Cited by 23 publications

References 24 publications

Anatomy of credit-less recoveries

Anatomy of credit-less recoveries

What is the Fiscal Stress in Euro Area? Evidence from a Joint Monetary-Fiscal Structural Model

A Note on Money and the Conduct of Monetary Policy

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