Money and Interest Rates with Endogeneously Segmented Markets / Fernando Alvarez, Andrew Atkeson, Patrick J. Kehoe.

Format:

Book

Author/Creator:

Alvarez, Fernando.

Contributor:

National Bureau of Economic Research.

Atkeson, Andrew.

Kehoe, Patrick J.

Series:

Working Paper Series (National Bureau of Economic Research) no. w7060.

NBER working paper series no. w7060

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1999.

Summary:

This paper analyses the effects of open market operations on interest rates in a model in which agents must pay a fixed cost to exchange assets and cash. Asset markets are endogenously segmented in that some agents choose to pay the fixed cost and some do not. When the fixed cost is zero, the model reduces to the standard one in which persistent money injections increase interest rates, flatten the yield curve, and lead to a downward-sloping yield curve on average. In contrast sufficiently segmented, then persistent money injections decrease nominal interest rates, steepen or even twist the yield curve, and lead to an upward-sloping yield curve on average.

Notes:

Print version record

March 1999.