Several papers have recently adopted the segmented markets model as a framework for monetary analysis. The characteristic assumption is that some households never participate in financial markets. This paper proves the existence of an equilibrium for segmented markets models where monetary...

In the data, after a contractionary monetary policy shock aggregate output decreases over time, with a trough after four to eight quarters. This paper replicates the `hump-shaped' response of output with a segmented markets model where part of the households are excluded from financial markets....

Following a contractionary monetary policy shock, the aggregate output decreases over time for six to eight quarters, while the real interest rate increases immediately and remains high for three quarters. Full participation models can hardly replicate the joint response of the aggregate output...