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Scarce collateral, the term premium, and quantitative easing

Listed author(s):
  • Williamson, Stephen D.

A model of money, credit, and banking is constructed in which the differential pledgeability of collateral and the scarcity of collateralizable wealth lead to a term premium – an upward-sloping nominal yield curve. Purchases of long-maturity government debt by the central bank are always a good idea, but for unconventional reasons. A floor system is preferred to a channel system, as a floor system permits welfare-improving asset purchases by the central bank.

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File URL: http://www.sciencedirect.com/science/article/pii/S0022053115001337
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Article provided by Elsevier in its journal Journal of Economic Theory.

Volume (Year): 164 (2016)
Issue (Month): C ()
Pages: 136-165

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Handle: RePEc:eee:jetheo:v:164:y:2016:i:c:p:136-165
DOI: 10.1016/j.jet.2015.07.010
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622869

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  14. Tobin, James, 1969. "A General Equilibrium Approach to Monetary Theory," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 1(1), pages 15-29, February.
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  24. Mark Gertler & Peter Karadi, 2013. "QE 1 vs. 2 vs. 3. . . : A Framework for Analyzing Large-Scale Asset Purchases as a Monetary Policy Tool," International Journal of Central Banking, International Journal of Central Banking, vol. 9(1), pages 5-53, January.
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