Alvarez, Fernando; Atkeson, Andrew; Kehoe, Patrick J. - In: Journal of Political Economy 110 (2002) 1, pp. 73-112
We analyze the effects of money injections on interest rates and exchange rates when agents must pay a Baumol-Tobin-style fixed cost to exchange bonds and money. Asset markets are endogenously segmented because this fixed cost leads agents to trade bonds and money infrequently. When the...