This paper studies optimal interest-rate policies when the central bank operates a channel system of interest-rate control. We conduct our analysis in a dynamic general equilibrium model with infinitely-lived agents who are subject to idiosyncratic trading shocks which generate random liquidity...

A model is developed that employs recent developments in the literature on search models of money to capture the distributional effects of monetary policy in a tractable way. Deterministic and stochastic versions of the model are studied. Money is not neutral, and these non-neutralities persist,...

This article complements the structural New-Keynesian macro framework with a no-arbitrage term structure model. Whereas our methodology is general, we focus on an extended macro-model with an unobservable time-varying markup and stochastic risk aversion. Term structure information helps to...

In this preliminary version we consider different types of ex-ante heterogeneity (production cost, preferences, market access, etc.) in a Lagos-Wright (2003) framework. Such heterogeneity generates equilibrium inequality in nominal wealth, or money holdings. We have two basic objectives. First,...

A defining feature of business cycles is the comovement of inputs at the sectorial level with aggregate activity. Standard models cannot account for this phenomenon. This paper develops and estimates a two-sector dynamic general equilibrium model which can account for this key regularity. My...

A segmented markets model is constructed in which transactions are conducted using credit and currency. Goods market segmentation plays an important role, in addition to the role played by conventional segmentation of asset markets. An important novelty of the paper is to show how the diffusion...

Models where money arises due to a transactions motive imply that an increase in aggregate activity will raise the demand for money. Models where money arises due to money being the most preferred form of precautionary savings imply that a decrease in individual uncertainty will lower the demand...