Aguiar, Alvaro; Drumond, Inês - Money Macro and Finance Research Group - 2007
adequacy regulations and households' preferences for liquidity. Detailing a dynamic new Keynesian general equilibrium model, in … which households require a (countercyclical) liquidity premium to hold bank capital, we find that the introduction of bank … capital amplifies monetary shocks to the macroeconomy through a liquidity premium effect on the external finance premium. This …