Posted
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June 17, 2012 10:46:27 PM |
Date
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2012-05 |
Author
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Markus K. Brunnermeier, Thomas M. Eisenbach and Yuliy Sannikov
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Affiliation
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National Bureau of Economic Research |
Title
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Macroeconomics with Financial Frictions: A Survey |
Summary / Abstract
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This article surveys the macroeconomic implications of financial frictions. Financial frictions lead to persistence and when combined with illiquidity to non-linear amplification effects. Risk is endogenous and liquidity spirals cause financial instability. Increasing margins further restrict leverage and exacerbate downturns. A demand for liquid assets and a role for money emerges. The market outcome is generically not even constrained efficient and the issuance of government debt can lead to a Pareto improvement. While financial institutions can mitigate frictions, they introduce additional fragility and through their erratic money creation harm price stability. |
Keywords
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Macroeconomics, financial frictions |
URL
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http://d.repec.org/n?u=RePEc:nbr:nberwo:18102&r=mon
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See
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More articles ...
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