Liquidity, Interest, and Asset Prices *
نویسنده
چکیده
A stylized theory of money and central banking is added to a model of competitive equilibrium in asset markets to explain the determination of the general level of asset prices and interest rates. The cash-in-advance constraint provides a transactions demand for money, but this is not sufficient to guarantee the determinacy of the price level if liquidity is costless or the price level is uncertain. The central bank plays a crucial role in determining interest rates and asset prices both as a supplier of liquidity and through its operation in the goods and asset markets. An extension of the model to allow for segregated markets can be used to show the impact of monetary policy on real asset prices and on asset-price volatility. The application of these ideas to financial intermediation, financial crises and bubbles is briefly discussed.
منابع مشابه
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