Chapter 18. Macro, Money, and Finance : A Continuous-Time Approach

This chapter puts forward a manual for how to setup and solve a continuous time model that allows to analyze endogenous (1) level and risk dynamics. The latter includes (2) tail risk and crisis probability as well as (3) the Volatility Paradox. Concepts such as (4) illiquidity and liquidity mismatch, (5) endogenous leverage, (6) the Paradox of Prudence, (7) undercapitalized sectors (8) time-varying risk premia, and (9) the external funding premium are part of the analysis. Financial frictions also give rise to an endogenous (10) value of money.

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Year of publication:	2016
Authors:	Brunnermeier, M.K. ; Sannikov, Y.
Published in:	Handbook of macroeconomics : volume 2, v. 2A-2B SET. - Saint Louis : Elsevier Science, ISBN 978-0-444-59488-4. - 2016, p. 1497-1545
Subject:	Macroeconomic modeling \| Monetary Economics \| (Inside) Money \| Endogenous Risk Dynamics \| Volatility paradox \| Paradox of Prudence \| Financial frictions \| Geldtheorie \| Monetary theory \| Volatilität \| Volatility \| Makroökonomik \| Macroeconomics \| Geldpolitik \| Monetary policy \| Finanzmarkt \| Financial market \| Risiko \| Risk \| Finanzkrise \| Financial crisis \| Kapitalmarkttheorie \| Financial economics