A Modigliani-Miller Theorem for Open-Market Operations

Quantitative Easing and Unconventional Monetary Policy – an Introduction

“…It is a useful starting point to see what assumptions are needed to generate this in effectiveness result. One formalisation of the argument is in Eggertsson and Woodford (2003), although the central idea goes back at least to Wallace (1981). The essence of their result is that if the private sector -in the form of a single representative agent who has an infinite horizon, faces no credit restrictions and is rational -sees the assets held by the government and by the central bank as indistinguishable from their own assets, then any swap of assets with the central bank cannot change anything.…”

New Monetarist Economics: Understanding Unconventional Monetary Policy*

“…This is essentially a kind of Modigliani-Miller result (see Modigliani and Miller, 1958). Other types of Modigliani-Miller results in the literature on macroeconomics are the Ricardian equivalence theorem (Barro 1974) and Wallace (1981).…”

Some Speculation On The Long‐Term Implications Of Financial Deregulation And Innovation

“…If, however, the private sector were able to issue securities which were regarded by the market a s perfect substitutes for government securities, then official purchases and sales of government securities could be matched by offsetting sales and purchases of private securities, leaving the aggregate supply of riskless securities (and hence prices and interest rates) unchanged. Under these extreme circumstances, a Modigliani-Miller theorem would apply to open market operations which would be rendered powerless a s a means of affecting interest rates and, accordingly, real activity (see Wallace 1981).…”