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Working Papers

February 1993, No. 93-1

Liquidity Effects and Transactions Technologies

Michael Dotsey and Peter N. Ireland

Recently there has been renewed interest in using general equilibrium models to understand the effects of monetary policy on interest rates and real economic activity.  This research effort involved the search for models that will account for the liquidity effects--the decrease in short-term interest rates and the increase in output and employment--that are associated with expansionary monetary policy. 

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