New Micro-foundations for Macroeconomics
"Liquidity, Business Cycles, and Monetary Policy"
John Moore (Edinburgh & LSE) Friday 10 July, 15.15 - 16.00
Abstract
This paper presents a model of monetary economy with differences in liquidity across assets. Our purpose is to study how aggregate production and asset prices fluctuate with shocks to productivity
and liquidity. In so doing, we examine what role government policy
might have through open market operations that change the mix of
assets held by the private sector. We also show that certain apparent
anomalies of asset markets are in fact normal features of a monetary
economy in which the circulation of money is essential for a better
allocation of resources.