The Macroeconomics of Financial Crises: How Risk Premiums and Liquidity Traps Affect Policy Options |
| |
Authors: | Manfred Gärtner Florian Jung |
| |
Institution: | (1) Institute of Economics, University of St. Gallen, Bodanstr. 1, CH-9000 St. Gallen, Switzerland |
| |
Abstract: | The paper offers an overview of what structural models of the IS-LM and Mundell-Fleming variety can tell about the macroeconomics of economic crises. In addition to demonstrating how the emergence
of risk premiums in money and capital markets can generate liquidity traps at positive interest rates and may drive economies
into recessions, it shows the following: (1) Fiscal policy works even in a small, open economy under flexible exchange rates
when the country is stuck in a liquidity trap; (2) Near the fringe of liquidity traps, there may be perfect traps, in which
neither monetary nor fiscal policy works when used in isolation but policy coordination is called for; and (3) Massive financial
crises in the domestic money market may even destabilize the economy. |
| |
Keywords: | |
本文献已被 SpringerLink 等数据库收录! |
|