We develop a microfounded model, where agents have the possibility to trade money for government bonds in an over-the-counter market. It allows us to address important open questions about the effects of central bank purchases of government bonds, these being: under what conditions these...

We develop a dynamic general equilibrium model to analyze the effects of central bank purchases of government bonds by investigating the following three questions: Under what conditions are these purchases socially desirable, what incentive problems do they mitigate, and how large are these...

We develop a microfounded model, where agents have the possibility to trade money for government bonds in an over-the-counter market. It allows us to address important open questions about the effects of central bank purchases of government bonds, these being: under what conditions these...

In the post-crisis period, increased regulation of financial intermediaries led to a significant decline in corporate bond market liquidity. In order to stabilize these markets, policy makers recently proposed that the trading of corporate bonds should be more centralized. In this paper, we show...

We develop a dynamic general equilibrium model to analyze the optimal quantity of liquid bonds by investigating the following three questions: Under what conditions is it socially desirable to contract the bond supply, what incentive problems are mitigated by doing this, and how large are the...

We develop a dynamic general equilibrium model to analyze the role of trading frictions in over-the-counter financial markets. In our model, agents face idiosyncratic preference shocks and a financial market allows them to rebalance their portfolio composed of liquid and illiquid assets in...

We develop a dynamic general equilibrium model to analyze the optimal quantity of liquid bonds by investigating the following three questions: Under what conditions is it socially desirable to contract the bond supply, what incentive problems are mitigated by doing this, and how large are the...

We integrate an overlapping generations model into a new monetarist framework and show that the Friedman rule is not optimal. This is because inflation makes saving for retirement less attractive, such that young agents optimally choose to increase their consumption at the expense of lower...