A revisit to liquidity effects--evidence from a non-linear approach

摘要

Although liquidity effects are important to quantitative monetary economics, the empirical support for their existence is controversial in existing literature. Conventional literature applies a linear system to investigate the significance of the liquidity effect. This paper points out the appropriateness of a non-linear framework in examining the existence of the liquidity effect and uncovers its existence for the case of non-borrowed reserves and the federal funds rate.