Altermatt, Lukas; Buggenum, Hugo van; Voellmy, Lukas - 2024
-in-advance economy. Liquidity transformation by banks increases aggregate consumption and investment relative to a cash-only economy but … can also lead to inefficient overinvestment. Furthermore, liquidity transformation can lead to multiple steady … 'liquidity trap', in which nominal bond rates equal zero and banks are indifferent between holding bonds and reserves. Whether …