Alvarez, Fernando; Atkeson, Andrew; Kehoe, Patrick J. - Federal Reserve Bank of Minneapolis - 2000
This paper analyzes the effects of money injections on interest rates and exchange rates in a model in which agents …’ consumption, these money injections affect real interest rates and real exchange rates. We show that the model generates the … observed negative relation between expected inflation and real interest rates. With moderate amounts of segmentation, the model …