Productivity Fluctuation and Nominal Non-Neutrality
Speaker(s)Tianxi Wang (University of Essex, United Kingdom)
LocationTinbergen Institute Amsterdam, room 1.01
Date and time
October 20, 2022
16:00 - 17:15
Abstract: This paper shows that if the productivity fluctuation is large enough, a nominal intervention with the goods market produces real effects. It does so in a mechanism previously unconsidered, by increasing both the nominal price fluctuation and the nominal revenue of bank borrowers. These increases have opposite effects for the cost of borrowing bank money. The net effect depends on how the intervention is wound down. Lastly, a rise in the scale of banks’ money creation reduces the borrowing cost by leveraging up the return to holding fiat money. (single authored paper).