Speaker: Dr Alexander Haas
Affiliation: Monash University
Location: Room 128A, Human Performance Building (#26A), St Lucia Campus
Zoom: https://uqz.zoom.us/j/82603079317
Abstract: This paper builds on two empirical observations: (i) financial conditions are rele-vant drivers of the business cycle, and (ii) early stages of the 2007/08 financial crisis, in particular, were driven by an erosion of safety and a dry-up of liquidity. Liquid-ity and safety are broad and interlinked notions, difficult to disentangle empirically. Their distinction is crucial for monetary and fiscal policy design though. In this paper, we endogenize the liquidity and safety of private assets in a medium-scale new-Keynesian model with heterogeneous firms and two financial frictions (on asset resaleability and quality paired with asymmetric information). Using U.S. macro and financial data, we estimate this model to (i) identify the structural drivers of liquidity and safety premia, (ii) study the role of both types of financial shocks over the business cycle, (iii) revisit the 2007/08 financial crisis in detail, and (iv) provide several further results on policy, fiscal multipliers, and the so called liquidity puzzle.
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