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Bond Premium Cyclicality and Liquidity Traps
| Content Provider | Scilit |
|---|---|
| Author | Caramp, Nicolas Singh, Sanjay R. |
| Copyright Year | 2020 |
| Description | Journal: SSRN Electronic Journal Safe asset shortages can expose the economy to liquidity traps. The nature of these traps is determined by the cyclicality of the bond premium. Self-fulfilling liquidity traps are associated with a counter-cyclical bond premium. Small issuances of government debt crowd out private debt and exacerbate these pessimism-driven recessions. In contrast, fundamental liquidity traps arise under a pro-cyclical bond premium and government debt is expansionary. In the data, we find evidence of a counter-cyclical bond premium and a pro-cyclical supply of safe assets. We propose robust policies that prevent the existence of self-fulfilling traps and are expansionary in fundamental traps. |
| Related Links | https://repec.dss.ucdavis.edu/files/7jbkNDDAV7RSUECZEzwGPV1S/BPCLT_CS.pdf https://papers.ssrn.com/sol3/Delivery.cfm?abstractid=3529769 |
| ISSN | 10914358 |
| e-ISSN | 15565068 |
| DOI | 10.2139/ssrn.3529769 |
| Journal | SSRN Electronic Journal |
| Language | English |
| Publisher | Elsevier BV |
| Publisher Date | 2020-01-31 |
| Access Restriction | Open |
| Subject Keyword | Journal: SSRN Electronic Journal Bond Premium Endogenous Safe Assets Liquidity Trap |
| Content Type | Text |
| Resource Type | Article |
| Subject | Public Health, Environmental and Occupational Health Psychiatry and Mental Health |