search query: @author Dutta, J. / total: 6
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Author: | Dutta, J. Kapur, S. |
Title: | Liquidity preference and financial intermediation. |
Journal: | Review of Economic Studies
1998 : JUL, VOL. 65(3):224, p. 551-572 |
Index terms: | FINANCIAL INTERMEDIARIES FINANCIAL INSTITUTIONS MONETARY POLICY ECONOMETRIC MODELS |
Language: | eng |
Abstract: | The authors examine the characteristics of optimal policies in a general equilibrium model with incomplete markets. Markets are incomplete because of uninsured preference uncertainty, and because productive capital is traded infrequently. Rational individuals are willing to hold a liquid asset - "money" - at a premium. Monetary policy interacts with existing financial institutions to determine this premium, as well as the level of precautionary holdings. The study shows that inflation is expansionary, and that the optimal inflation rate is positive if there is no operative banking system (the Tobin effect). |
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