Macro, Money, and Finance: A Continuous-Time Approach

M. K. Brunnermeier, Y. Sannikov

Research output: Chapter in Book/Report/Conference proceedingChapter

8 Scopus citations

Abstract

This chapter puts forward a manual for how to setup and solve a continuous time model that allows to analyze endogenous (1) level and risk dynamics. The latter includes (2) tail risk and crisis probability as well as (3) the Volatility Paradox. Concepts such as (4) illiquidity and liquidity mismatch, (5) endogenous leverage, (6) the Paradox of Prudence, (7) undercapitalized sectors (8) time-varying risk premia, and (9) the external funding premium are part of the analysis. Financial frictions also give rise to an endogenous (10) value of money.

Original languageEnglish (US)
Title of host publicationHandbook of Macroeconomics, 2016
EditorsJohn B. Taylor, Harald Uhlig
PublisherElsevier B.V.
Pages1497-1545
Number of pages49
ISBN (Print)9780444594877
DOIs
StatePublished - Jan 1 2016

Publication series

NameHandbook of Macroeconomics
Volume2
ISSN (Print)1574-0048

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics
  • Economics, Econometrics and Finance (miscellaneous)

Keywords

  • (Inside) Money
  • Endogenous Risk Dynamics
  • Financial frictions
  • Macroeconomic modeling
  • Monetary Economics
  • Paradox of Prudence
  • Volatility paradox

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  • Cite this

    Brunnermeier, M. K., & Sannikov, Y. (2016). Macro, Money, and Finance: A Continuous-Time Approach. In J. B. Taylor, & H. Uhlig (Eds.), Handbook of Macroeconomics, 2016 (pp. 1497-1545). (Handbook of Macroeconomics; Vol. 2). Elsevier B.V.. https://doi.org/10.1016/bs.hesmac.2016.06.002