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Heterogeneous consumers, segmented asset markets, and the effects of monetary policy

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  • Enders, Zeno

Abstract

This paper examines how segmented asset markets can generate 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 longer-lasting, non-degenerate wealth distribution. As a result, the demand elasticity differs across consumers, affecting optimal markups chosen by producers. The model predicts a short-term inflation-output trade-off, a liquidity effect, countercyclical markups, and procyclical wages and expenditure dispersion across consumers after monetary shocks. Including a modest degree of real or nominal wage rigidity yields responses that are also quantitatively in line with empirical evidence.

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  • Enders, Zeno, 2012. "Heterogeneous consumers, segmented asset markets, and the effects of monetary policy," Working Papers 0537, University of Heidelberg, Department of Economics.
  • Handle: RePEc:awi:wpaper:0537
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    References listed on IDEAS

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