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http://hdl.handle.net/11531/25913
Título : | Illiquid Financial Markets and Monetary Policy |
Autor : | Suárez-Lledó Grande, José Geromichalos, Athanasios Licari, Juan |
Resumen : | This paper analyzes the role of money in asset markets characterized by search frictions. We develop a dynamic framework that brings together a model for illiquid financial assets `a la Duffie, G arleanu, and Pedersen, and a search-theoretic model of monetary exchange `a la Lagos and Wright. The presence of decentralized financial markets generates an essential role for money, which helps investors re-balance their portfolios. We provide conditions that guarantee the existence of a monetary equilibrium. In this case, asset prices are always above their fundamental value, and this differential represents a liquidity premium. We are able to derive an asset pricing theory that delivers an explicit connection between monetary policy, asset prices, and welfare. We obtain a negative relationship between inflation and equilibrium asset prices. This key result stems from the complementarity between money and assets in our framework |
URI : | http://hdl.handle.net/11531/25913 |
Aparece en las colecciones: | Documentos de Trabajo |
Ficheros en este ítem:
Fichero | Descripción | Tamaño | Formato | |
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thanasi juan money_frict_investm_mkts-test.pdf | 172,23 kB | Adobe PDF | Visualizar/Abrir |
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