Using a segmented market model that includes state-dependent asset market decisions along with access to credit, we analyze the impact that transactions credit has on interest rates and prices. We find that the availability of credit substantially changes the dynamics in the model, allowing...

Using a segmented market model that includes state-dependent asset market decisions along with access to credit, we analyze the impact that transactions credit has on interest rates and prices. We find that the availability of credit substantially changes the dynamics in the model, allowing...

Optimal monetary policy analysis can be viewed as a constrained optimization problem: the policymaker chooses a competitive equilibrium allocation that maximizes social welfare among the set of all feasible competitive equilibrium allocations. Part of the solution to this problem is a monetary...

How the Federal Reserve reacts to economic activity has significant implications for the way the economy behaves. Yet the importance of these responses has received limited attention in the economic literature. Much of the literature devoted to the economic effects of monetary policy...

To be useful as policy indicators, the monetary aggregates M1 and M2 must either (1) provide information on the current state of the economy or (2) help predict future values of economic variables that are of concern to the policymakers. Statistical analysis shows that these aggregates perform...