Liquidity Models in Open Economies: Theory and Empirical Evidence

18 Pages Posted: 21 Sep 2000 Last revised: 24 Sep 2010

See all articles by Nouriel Roubini

Nouriel Roubini

New York University - Leonard N. Stern School of Business - Department of Economics; National Bureau of Economic Research (NBER)

Vittorio Grilli

Independent; National Bureau of Economic Research (NBER)

Date Written: October 1995

Abstract

This paper presents an overview of recent theoretical and empirical research on 'liquidity models' in open economies; this is a class of optimizing models where money has effects on real asset prices and economic activity without relying on the 'ad-hoc' assumption of price/wage stickiness. The non-neutrality of money derives from a temporary segmentation between goods and asset markets. After surveying the theoretical literature on liquidity models, we present empirical evidence based on VAR econometric techniques for the seven major industrial countries. Such evidence is shown to be consistent with the main implications of the liquidity models.

Suggested Citation

Roubini, Nouriel and Grilli, Vittorio, Liquidity Models in Open Economies: Theory and Empirical Evidence (October 1995). NBER Working Paper No. w5313. Available at SSRN: https://ssrn.com/abstract=225377

Nouriel Roubini (Contact Author)

New York University - Leonard N. Stern School of Business - Department of Economics ( email )

269 Mercer Street
New York, NY 10003
United States
212-998-0886 (Phone)
212-995-4218 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Vittorio Grilli

Independent

Ministero del Tesoro
Direzione Generale del Tesoro Capo del Servizio I via XX Settembre 97
Roma 00187

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
37
Abstract Views
937
PlumX Metrics