This paper develops a stochastic general equilibrium model of the federal funds market that incorporates non-Fisherian effects on interest rates stemming from both supply and demand shocks to reserves. Such a model may reconcile the widespread belief in a liquidity effect of money supply shocks...

This paper develops a stochastic general equilibrium model of the federal funds market that incorporates non-Fisherian effects on interest rates stemming from both supply and demand shocks to reserves. Such a model may reconcile the widespread belief in a liquidity effect of money supply shocks...

We define rational bubbles to be securities with payoffs occurring in the infinitely distant future and investigate the behavior of bubbles values. We extend our analysis to a setting of uncertainty. In an infinite horizon arbitrage-free model of asset prices, we interpret the money market...

The Arbitrage Pricing Theory relates the expected rates of return on a sequence of primitive securities to their factor exposures, suggesting that factor risk is of critical importance in asset pricing. However, we show that if the sequence of primitive returns is replaced by a sequence of...