|
| |
| Bodo Herzog |
| |
| ''Modelling the Interaction of Liquidity to Price Dynamics'' |
| ( 2020, Vol. 40 No.2 ) |
| |
| |
| This paper studies the impact of financial liquidity on the macro-economy. We extend a classic macroeconomic model and compute numerical simulations. The model confirms that persistently low inflation can occur despite a high degree of financial liquidity due to a reallocation of cash, normal and risk-free bonds. In that regard, our model uncovers an explanation of a flat Phillips curve. Overall, our approach contributes to a rather disregarded matter in macroeconomic theory. |
| |
| |
| Keywords: Macroeconomic Theory, Liquidity, Flat Phillips Curve, Numerical Simulation, Modelling |
JEL: E4 - Money and Interest Rates: General
E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit: General |
| |
| Manuscript Received : Feb 29 2020 | | Manuscript Accepted : Jun 02 2020 |
|
