A note on the societal benefits of illiquid bonds
Kocherlakota (2003) provides an example of a monetary economy where efficiency is enhanced with the introduction of a nominally risk-free bond that is specifically designed to be illiquid. The societal benefit of an illiquid bond in his example, however, is transitory, and he does not characterize an optimal policy. I use an analytically tractable framework to characterize an optimal intervention and to show that the purported benefits of an illiquid bond market persist in a steady state.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 44 (2011)
Issue (Month): 1 (February)
|Contact details of provider:|| Postal: Canadian Economics Association Prof. Steven Ambler, Secretary-Treasurer c/o Olivier Lebert, CEA/CJE/CPP Office C.P. 35006, 1221 Fleury Est Montréal, Québec, Canada H2C 3K4|
Web page: http://economics.ca/cje/
More information through EDIRC
|Order Information:|| Web: http://economics.ca/en/membership.php Email: |