Central banks do not operate in a frictionless world. Different types of assets, goods or labor are neither equally liquid nor traded in perfectly competitive markets. Quite the contrary, frictions are everywhere; they shape the organization and functioning of markets, they determine the liquidity of the assets, services and goods traded. They therefore have a first order effect on the efficiency of policies of liquidity regulation or creation and hence on aggregate economic activity.
This two-day conference brings together renowned international scholars with the aim of informing policy makers on how to improve market functioning and the interplay between private liquidity and monetary creation. By investigating how policy efficiency varied with frictions in crises times but also under normal circumstances, they highlight the importance of paying attention to operational dimensions such as the informational properties of assets or the microstructure of markets. They also shed new light on the interaction between liquidity and financial stability, the impact of the structure of financial markets on the transmission of monetary policy, the role of collateral and intermediaries in financial markets.
Conveners: Vincent Bignon (Bank of France), Régis Breton (Bank of France), Sébastien Lotz (Paris 2), Guillaume Plantin (Sciences Po), Guillaume Rocheteau (Irvine), Mariana Rojas Breu (Dauphine)