Norges Bank paper seeks to improve modelling of money
Researchers aim to capture money’s role as a medium of exchange and a liquid asset
Research published by Norges Bank on December 31 presents a model that aims to better capture the role of money in an economy, both as a medium of exchange and a liquid asset.
Previous papers have tended to focus only on the former role, write authors Jin Cao and Gerhard Illing in their paper, Money in the Equilibrium of Banking.
Adding in the latter function as a liquid asset significantly changes the role of the central bank: "It is no longer a passive provider of flat money, but an active
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