Liquidity effects in non Ricardian economies

Abstract

It has often been found difficult to generate a liquidity effect (i.e. a negative effect of monetary injections on the nominal interest rate) in the traditional "Ricardian" stochastic dynamic model with a single infinitely lived household. We show that moving to a non Ricardian environment where new agents enter the economy in each period allows to generate such a liquidity effect.liquidity effect ; non Ricardian economies