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Title:Heterogeneous consumers, segmented asset markets, and the effects of monetary policy PDF Logo
Authors:Enders, Zeno
Issue Date:2010
Series/Report no.:Bonn econ discussion papers 2010,8
Abstract:This paper examines the implications of segmented assets markets for the real and nominal effects of monetary policy. I develop a model, in which varieties of consumption bundles are purchased sequentially. Newly injected money thus disseminates slowly through the economy via second-round effects and induces a non-degenerate, long-lasting heterogeneity in wealth. As a result, the effective elasticity of substitution differs across households, affecting optimal markups chosen by producers. In line with empirical evidence, the model predicts a short-term inflation-output trade-off, a liquidity effect, countercyclical markups, and procyclical profits and wages after monetary shocks.
Subjects:Segmented Asset Markets
Monetary Policy
Countercyclical Markups
Liquidity Effect
Limited Participation
JEL:E31
E32
E51
Document Type:Working Paper
Appears in Collections:Bonn Econ Discussion Papers, Bonn Graduate School of Economics (BGSE), Universität Bonn

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