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ADVERSE SELECTION, SEGMENTED MARKETS, AND THE ROLE OF MONETARY POLICY
Published online by Cambridge University Press: 24 June 2011
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.
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- Articles
- Information
- Macroeconomic Dynamics , Volume 15 , Supplement S2: Money, Credit, and Liquidity: Part 2 , September 2011 , pp. 269 - 292
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- Copyright © Cambridge University Press 2011
References
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