Short-run and long-run effects of monetary policy in a general equilibrium model with bank reserves

2006 ◽  
Vol 23 (4) ◽  
pp. 597-621 ◽  
Author(s):  
Pedro J. Gutiérrez
Keyword(s):  
Monetary Policy ◽  
General Equilibrium ◽  
Equilibrium Model ◽  
General Equilibrium Model ◽  
Long Run ◽  
Short Run ◽  
Bank Reserves

scholarly journals Understanding Benign Liquidity Traps: The Case of Japan

2017 ◽  
Vol 18 (3) ◽  
pp. 267-282 ◽  
Author(s):  
Stefan Homburg
Keyword(s):  
Monetary Policy ◽  
General Equilibrium ◽  
Interest Rates ◽  
Equilibrium Model ◽  
General Equilibrium Model ◽  
Anglo Saxon ◽  
Liquidity Trap ◽  
Approach Zero

Abstract Japan has been in a benign liquidity trap since the 1990s. In a benign liquidity trap, interest rates approach zero and monetary policy is ineffective but output and employment perform decently. Such a pattern contradicts traditional macro theories. This paper introduces a monetary general equilibrium model that is compatible with Japan’s performance and resolves puzzles associated with liquidity traps. Possible conclusions for Anglo-Saxon countries and eurozone members are also discussed.

scholarly journals Market selection in large economies: A matter of luck

2019 ◽  
Vol 14 (2) ◽  
pp. 437-473 ◽  
Author(s):  
Filippo Massari
Keyword(s):  
General Equilibrium ◽  
Equilibrium Model ◽  
General Equilibrium Model ◽  
Clear Distinction ◽  
Risk Attitudes ◽  
Market Selection ◽  
Selection Hypothesis ◽  
Market Selection Hypothesis ◽  
Long Run

In a general equilibrium model with a continuum of traders and bounded aggregate endowment, I investigate the market selection hypothesis that markets favor traders with accurate beliefs. Contrary to known results for economies with (only) finitely many traders, I find that risk attitudes affect traders' survival and that markets can favor “lucky” traders with incorrect beliefs over “skilled” traders with accurate beliefs. My model allows for a clear distinction between luck and skills, and it shows that market selection forces induce efficient prices even when accurate traders do not survive in the long run.

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