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Goldsmiths - University of London

Structural liquidity: The money-industry nexus

Cardinale, Ivano and Scazzieri, R. 2016. Structural liquidity: The money-industry nexus. Structural Change and Economic Dynamics, 39, pp. 46-53. ISSN 0954-349X [Article]

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Abstract or Description

This paper addresses the relationship between liquidity and production activity. It argues that this relationship becomes fully evident only if one considers intermediate levels of aggregation, and in particular stages of production within each industrial sector and their interdependence across sectors. To illustrate this, the paper introduces the concept of structural liquidity, which denotes material funds that are endogenously formed within the productive system before one considers the provision of liquidity by means of money. Structural liquidity is analyzed by combining (i) the representation of the productive system as an arrangement of fabrication stages sequentially related in time; and (ii) the representation of the productive system as a set of interdependent industrial sectors. The analysis identifies the structural liquidity problem as the need to satisfy both a viability condition (deriving from sectoral interdependencies) and a full employment condition (deriving from the sequencing of fabrication stages). The analysis highlights previously unexplored trade-offs, which have wide-ranging implications for monetary and liquidity policy.

Item Type: Article

Identification Number (DOI):

https://doi.org/10.1016/j.strueco.2016.09.001

Departments, Centres and Research Units:

Institute of Management Studies

Dates:

DateEvent
27 September 2016Accepted
1 December 2016Published

Item ID:

19297

Date Deposited:

09 Dec 2016 11:20

Last Modified:

27 Jun 2017 11:42

Peer Reviewed:

Yes, this version has been peer-reviewed.

URI: http://research.gold.ac.uk/id/eprint/19297

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