Liquidity Traps and Monetary Policy: Managing a Credit Crunch

Juan Pablo Nicolini

No 335, 2016 Meeting Papers from Society for Economic Dynamics

Abstract: We study a model with heterogeneous producers that face collateral and cash in advance constraints. A tightening of the collateral constraint results in a credit-crunch generated recession that reproduces several features of the financial crisis that unraveled in 2007. The model can suitable be used to study the effects on the main macroeconomic variables and of alternative policies following the credit crunch. The policy implications are in sharp contrast with the prevalent view in most Central Banks, based on the New Keynesian explanation of the liquidity trap.

Date: 2016
New Economics Papers: this item is included in nep-ban, nep-cba, nep-cse, nep-dge and nep-mon
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Related works:
Journal Article: Liquidity Traps and Monetary Policy: Managing a Credit Crunch (2020)
Working Paper: Liquidity Traps and Monetary Policy: Managing a Credit Crunch (2017)
Working Paper: Liquidity Traps and Monetary Policy: Managing a Credit Crunch (2014)
Working Paper: Liquidity Traps and Monetary Policy: Managing a Credit Crunch (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed016:335

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