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Macroeconomics with Financial Frictions: A Survey / Markus K. Brunnermeier, Thomas M. Eisenbach, Yuliy Sannikov.
- Format:
- Book
- Author/Creator:
- Brunnermeier, Markus K.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w18102.
- NBER working paper series no. w18102
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2012.
- Summary:
- 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.
- Notes:
- Print version record
- May 2012.
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