Working Paper: CEPR ID: DP16222
Authors: Pierpaolo Benigno; Gianluca Benigno
Abstract: We would like to propose a new framework for monetary policy analysis that encompasses, as a special case, the Neo-Wicksellian paradigm. A general form of an aggregate-demand equation reveals a role for liquidity, as well as less effective movements in future real rates with respect to current ones, in stimulating aggregate demand. The quantity of reserves and their interest rate both matter for determining inflation and economic activity.
Keywords: No keywords provided
JEL Codes: No JEL codes provided
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| central bank's interest rate on reserves (E52) | deposit rate (E43) |
| deposit rate (E43) | consumption-saving choices (E21) |
| quantity of reserves (Q30) | liquidity premiums (G19) |
| liquidity premiums (G19) | aggregate demand (E00) |
| quantity of reserves (Q30) | aggregate demand (E00) |
| policy rate (E43) | inflation (E31) |
| government tax policy (H29) | liquidity premiums (G19) |
| liquidity premiums (G19) | economic activity (E20) |
| policy rate (E43) | economic activity (E20) |
| future real rates (E43) | short-run aggregate demand (E00) |