BIS paper highlights money markets’ impact on real economy
Central bank liquidity interventions can prevent large drops in output, authors find
Frictions in money markets can have a major impact on the real economy unless central banks intervene, research published by the Bank for International Settlements finds.
Fiorella De Fiore, Marie Hoerova and Harald Uhlig explore a 15-year trend in the eurozone towards greater activity in the secured money market, with a corresponding drop in unsecured lending. In their working paper, they note the US has experienced a similar trend.
The authors build a general equilibrium model around five
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