Monetary Transaction Costs and the Term Premium / Raphael Espinoza, Dimitrios P. Tsomocos.

Format:

Book

Government document

Author/Creator:

Espinoza, Raphael.

Contributor:

Tsomocos, Dimitrios P.

International Monetary Fund.

Series:

IMF Working Papers; Working Paper ; No. 2013/085

IMF Working Papers

Language:

English

Subjects (All):

Transaction costs.

Externalities (Economics).

Physical Description:

1 online resource (39 p.)

Place of Publication:

Washington, D.C. : International Monetary Fund, 2013.

Language Note:

English

Summary:

We show that, in a monetary equilibrium, trade and asset prices depend on both the supply of the liquidity by the Central Bank and the liquidity of assets and commodities. As a result, monetary aggregates are informative for the conduct of monetary policy. We also show asset prices are higher in liquidity-constrained states of nature. This generates a term premium even in absence of aggregate uncertainty. These results hold in any monetary economy with heterogeneous agents and short-term liquidity effects, where monetary costs act as transaction costs and the quantity theory of money is verified.

Contents:

Cover; Contents; I. Introduction; II. The Baseline Model; A. Structure of the Model; Figures; 1. Time and uncertainty structure of the model; 2. Timing of commodity, asset and money markets; B. Budget Set for Agent α; C. Budget Set for Agent β; III. Monetary Equilibrium; IV. Liquidity and the Term Structure of Interest Rates; 3. Three period example; V. Extensions; A. Multiple Commodities; B. An Extension of Cash-In-Advance Constraints; C. Budget Set for Agent α; D. Budget Set for Agent β; VI. Conclusion; References; Appendix 1; Appendix 2; Appendix 3

Notes:

Description based upon print version of record.

Includes bibliographical references.

Description based on print version record.

ISBN:

9781484341322

1484341325

9781484398302

1484398300

9781484371442

1484371445