Altermatt, Lukas and Iwasaki, Kohei and Wright, Randall (2023) General Equilibrium with Multiple Liquid Assets. Review of Economic Dynamics, 51. pp. 267-291. DOI https://doi.org/10.1016/j.red.2023.01.003
Altermatt, Lukas and Iwasaki, Kohei and Wright, Randall (2023) General Equilibrium with Multiple Liquid Assets. Review of Economic Dynamics, 51. pp. 267-291. DOI https://doi.org/10.1016/j.red.2023.01.003
Altermatt, Lukas and Iwasaki, Kohei and Wright, Randall (2023) General Equilibrium with Multiple Liquid Assets. Review of Economic Dynamics, 51. pp. 267-291. DOI https://doi.org/10.1016/j.red.2023.01.003
Abstract
This paper studies, analytically and numerically, economies with multiple liquid assets: fiat currency; fixed-supply real assets; and reproducible capital. Cases are considered where assets provide direct liquidity, and indirect liquidity via over-the-counter trade. The results shed new light on how monetary policy affects asset markets and investment. We also provide novel results on endogenous fluctuations (self-fulfilling prophecies), including coexistence of multiple equilibria with very different correlation and volatility patterns. Then we investigate if monetary policy can eliminate multiplicity. A calibration exercise assesses the impact on asset markets and on welfare of different policies, including changing inflation, and eliminating currency altogether.
Item Type: | Article |
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Uncontrolled Keywords: | asset returns; dynamics; Liquidity; monetary policy |
Divisions: | Faculty of Social Sciences Faculty of Social Sciences > Economics, Department of |
SWORD Depositor: | Unnamed user with email elements@essex.ac.uk |
Depositing User: | Unnamed user with email elements@essex.ac.uk |
Date Deposited: | 04 Feb 2023 17:52 |
Last Modified: | 20 Jul 2024 01:00 |
URI: | http://repository.essex.ac.uk/id/eprint/34604 |
Available files
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Licence: Creative Commons: Attribution-Noncommercial-No Derivative Works 4.0
Filename: AIW-RED-Final-figures.pdf
Licence: Creative Commons: Attribution-Noncommercial-No Derivative Works 4.0