This paper analyzes the effects of money injections on interest rates and exchange rates in a model in which agents must pay a Baumol-Tobin style fixed cost to exchange bonds and money. Asset markets are endogenously segmented because this fixed cost leads agents to trade bonds and money only...

This paper analyses the effects of open market operations on interest rates in a model in which agents must pay a fixed cost to exchange assets and cash. Asset markets are endogenously segmented in that some agents choose to pay the fixed cost and some do not. When the fixed cost is zero, the...

This paper analyzes the effects of money injections on interest rates and exchange rates in a model in which agents must pay a Baumol-Tobin style fixed cost to exchange bonds and money. Asset markets are endogenously segmented because this fixed cost leads agents to trade bonds and money only...

We examine the limiting behavior of cooperative and noncooperative fiscal policies as countries’ market power goes to zero. We show that these policies converge if countries raise revenues through lump-sum taxation. However, if there are unremovable domestic distortions, such as distorting...

This paper provides a simple counterexample to the standard belief that in a world economy in which all countries are small, strategic interactions between policymakers are trivial and thus cooperative and noncooperative government policies coincide. It is well known that this holds for tariff...