Hostname: page-component-586b7cd67f-rdxmf Total loading time: 0 Render date: 2024-11-26T18:05:31.700Z Has data issue: false hasContentIssue false
  • English
  • Français

ADVERSE SELECTION, SEGMENTED MARKETS, AND THE ROLE OF MONETARY POLICY

Published online by Cambridge University Press:  24 June 2011

Daniel Sanches  and
Stephen Williamson
Daniel Sanches
Affiliation:
Federal Reserve Bank of Philadelphia
Stephen Williamson*
Affiliation:
Washington University in St. LouisRichmond Federal Reserve Bank and Federal Reserve Bank of St. Louis
*
Address correspondence to: Stephen Williamson, Department of Economics, Washington University in St. Louis, Campus Box 1208, St. Louis, MO 63130, USA; e-mail: [email protected].
Get access Rights & Permissions [Opens in a new window]

Abstract

A model is constructed in which trading partners are asymmetrically informed about future trading opportunities and spatial and informational frictions limit arbitrage between markets. These frictions create inefficiency relative to a full-information equilibrium, and the extent of this inefficiency is affected by monetary policy. A Friedman rule is optimal under a wide range of circumstances, including ones where segmented markets limit the extent of monetary policy intervention.

Keywords

Asymmetric InformationPrice DispersionSegmented MarketsFriedman Rule
Type
Articles
Information
Macroeconomic Dynamics , Volume 15 , Supplement S2: Money, Credit, and Liquidity: Part 2 , September 2011 , pp. 269 - 292
Copyright
Copyright © Cambridge University Press 2011

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

REFERENCES

Ennis, Huberto (2008) Search, money, and inflation under private information. Journal of Economic Theory 138, 101–131.CrossRefGoogle Scholar
Lagos, Ricardo and Wright, Randall (2005) A unified framework for monetary theory and policy analysis. Journal of Political Economy 113, 463–484.Google Scholar
Lucas, Robert (1972) Expectations and the neutrality of money. Journal of Economic Theory 4, 103–124.CrossRefGoogle Scholar
Maskin, Eric and Riley, John (1984) Monopoly with incomplete information. Rand Journal of Economics 2, 171–196.CrossRefGoogle Scholar
Williamson, S. (2008) Monetary policy and distribution. Journal of Monetary Economics 55, 1038–1053.CrossRefGoogle Scholar
Williamson, S. (2009) Transactions, credit, and central banking in a model of segmented markets. Review of Economic Dynamics 12, 344–362.CrossRefGoogle Scholar