Ination and Interest Rates with Endogenous Market Segmentation
نویسندگان
چکیده
We examine a monetary economy wherein endogenous asset market segmentation permits the extent of household participation in open market operations to smoothly vary with changes in aggregate conditions. While we impose no stickiness at the microeconomic level in either prices or portfolio adjustment, we nd that our exible asset market segmentation can deliver gradual adjustment in the aggregate price level following a monetary shock and thus persistent non-neutralities. In our model economy, households incur xed transactions costs when exchanging bonds and money and, as a result, carry money balances in excess of current spending to limit the frequency of such trades. As only a fraction of households choose to actively trade bonds and money at any given time, the market is endogenously segmented. Moreover, because our households have the ability to alter the timing of their trading activities, the extent of market segmentation varies over time in response to real and nominal shocks. We show that this added exibility can substantially reinforce both sluggishness in aggregate price adjustment, and the persistence of liquidity e¤ects in real and nominal interest rates, relative to models with exogenously segmented asset markets. Thomas gratefully acknowledges research support from the Alfred P. Sloan Foundation and the National Science Foundation (grant #0318163).
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تاریخ انتشار 2009