Open-market operations in a model of regulated, insured intermediaries
AbstractIn “The Inefficiency of Interest-Bearing National Debt,” (JPE, April 1979) we argued that private sector transaction costs are needed in order to explain interest on government debt. It follows that if the government’s transaction costs do not depend on its portfolio, then, barring special circumstances, an open-market purchase is deflationary and welfare improving. In this paper we show that this result can survive a potentially relevant special circumstance: reserve requirements which limit the size of insured intermediaries.
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Bibliographic InfoPaper provided by Federal Reserve Bank of Minneapolis in its series Staff Report with number 34.
Date of creation: 1978
Date of revision:
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- Stein, Jerome L, 1979. "Inside the Monetarist Black Box: Reply," American Economic Review, American Economic Association, vol. 69(5), pages 944-46, December.
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- Bryant, John & Wallace, Neil, 1979. "The Inefficiency of Interest-bearing National Debt," Journal of Political Economy, University of Chicago Press, vol. 87(2), pages 365-81, April.
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- John Bryant, 1978. "Transactions demand for money," Staff Report 38, Federal Reserve Bank of Minneapolis.
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