Macro Musings with David Beckworth cover image

Will Diamond on Safe Assets, Risk-Free Rates, and Convenience Yields and their Implications for Policy

Macro Musings with David Beckworth

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The I S L Model in Macro and Cansey

I s is fundamentals, l m is liquidity preference. You have multiple forces which simultaneously have to be in equilibrium together. sticky prices and wages got to the idea that maybe over a couple quarters a year or two years, the fed can temporarily manipulate real interest rates to control the economy. And i don't think i've ever seen a model that puts all this together and asks the question, suppose we put liquidity frictions in in a meaningful way, on top of our old framework? What does that do to what we should think about obtimlity policy? I'd like some point of view on that at some point.

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