Adverse Selection, Segmented Markets, and the Role of Monetary Policy

Stephen Williamson and Daniel Sanches

MPRA Paper from University Library of Munich, Germany

Abstract: A model is constructed in which trading partners are asymmetrically informed about future trading opportunities and where spatial and informational frictions limit arbitrage between markets. These frictions create an 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: Adverse Selection; Monetary Policy; Search (search for similar items in EconPapers)
JEL-codes: E4 E5 (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (3)

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Related works:
Journal Article: ADVERSE SELECTION, SEGMENTED MARKETS, AND THE ROLE OF MONETARY POLICY (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:20691

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