Our news journalists obtained a quote from the research, "The gradual propagation mechanism produced by our model is novel in the literature. We provide an analytical characterization of this mechanism, showing that the magnitude of the liquidity effect on impact, and its persistence, depend on the ratio of two parameters: the long-run interest rate elasticity of money demand and the intertemporal substitution elasticity."
According to the news editors, the research concluded: "The model simultaneously explains the short-run 'instability' of money demand estimates as well as the stability of long-run interest-elastic money demand."
For more information on this research see: Persistent Liquidity Effects and Long-Run Money Demand. American Economic Journal-Macroeconomics, 2014;6(2):71-107. American Economic Journal-Macroeconomics can be contacted at:
The news correspondents report that additional information may be obtained from F. Alvarez, EIEF, I-00187
Keywords for this news article include:
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