This paper models the dynamic response of the nominal interest rate, the money growth rate and the real interest rate to monetary policy shocks. The monetary authority controls the supply of short-term government securities directly, and the short-term nominal interest rate indirectly through...

Several studies have recently adopted the segmented markets model as a framework for monetary analysis. The characteristic assumption is that some households never participate in financial markets. This paper proves the existence of an equilibrium for segmented markets models where monetary...