When the demand for money is infinitely the interest elastic, injecting base money into the system is akin to money being sucked into a Black Hole. Economics activity will not be revived by driving the rate of interest to zero. Full employment can only be restored by a judicious combination of...

Monetary policy may be effective in stabilising income via the real balance effect and the exchange rate channel. Even though interest rates of government bonds are subject to a zero lower bound, fiscal and monetary policy may be employed to change Tobin's q in a multi-asset model and thereby...