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Transactions, Credit, and Central Banking in a Model of Segmented Markets

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  • Stephen D. Williamson

    () (Department of Economics University of Iowa)

Abstract

A segmented markets model is constructed in which transactions are conducted using credit and currency. Goods market segmentation plays an important role, in addition to the role played by conventional segmentation of asset markets. An important novelty of the paper is to show how the diffusion of a money injection by the central bank depends not only on the interaction of agents in exchanging money for goods, but on the arrangements for clearing and settlement of credit instruments. The model permits open market operations, daylight overdrafts, reserve-holding, and overnight lending and borrowing, allowing us to consider a rich array of central banking arrangements and their implications

Suggested Citation

  • Stephen D. Williamson, 2006. "Transactions, Credit, and Central Banking in a Model of Segmented Markets," 2006 Meeting Papers 287, Society for Economic Dynamics.
  • Handle: RePEc:red:sed006:287
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    References listed on IDEAS

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    Cited by:

    1. Waknis, Parag, 2017. "A Segmented Markets Model to Teach Analysis of Monetary Policy Shocks in Developing Economies," MPRA Paper 78011, University Library of Munich, Germany.
    2. Choi, Hyung Sun, 2014. "Money, credit, risk of loss, and limited participation," International Review of Economics & Finance, Elsevier, vol. 34(C), pages 9-23.
    3. Waknis, Parag, 2017. "Demonetisation: Some Theoretical Perspectives," MPRA Paper 76391, University Library of Munich, Germany.
    4. Choi, Hyung Sun & Lee, Manjong, 2016. "Credit, banking, liquidity shortfall, and monetary policy," International Review of Economics & Finance, Elsevier, vol. 46(C), pages 87-99.
    5. Hyung Sun Choi & Manjong Lee, 2016. "Multiple Means of Payment, Excess Reserves, and Monetary Policy," Korean Economic Review, Korean Economic Association, vol. 32, pages 5-21.
    6. Choi, Hyung Sun, 2015. "Monetary policy, endogenous transactions, and financial market segmentation," Journal of Macroeconomics, Elsevier, vol. 44(C), pages 234-251.
    7. Zeno Enders, 2017. "Heterogeneous Consumers, Segmented Asset Markets, and the Real Effects of Monetary Policy," CESifo Working Paper Series 6467, CESifo Group Munich.
    8. Mahmoudi, Babak, 2013. "Open-Market Operations, Asset Distributions, and Endogenous Market Segmentation," MPRA Paper 50089, University Library of Munich, Germany.
    9. Li, Yan & Carroll, Wayne, 2011. "The payment mechanisms and liquidity effects," Journal of Macroeconomics, Elsevier, vol. 33(4), pages 656-667.

    More about this item

    Keywords

    Money; Segmented Markets; Credit; Central Banking;

    JEL classification:

    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates

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