Central Bank Purchases of Government Bonds

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may AbstractWe develop a microfounded model, where agents have the possibility to trade money for government bonds in an over-the-counter market. It allows us to address important open questions about the e¤ects of central bank purchases of government bonds, these being: under what conditions these purchases can be welfare-improving, what incentive problems they mitigate, and how large these e¤ects are. Our main …nding is that this policy measure can be welfare-improving, by correcting a pecuniary externality. Concretely, the value of money is increased as central bank's purchases of government bonds induce agents to increase their demand for money, which is welfare-improving.

The societal benefit of a financial transaction tax

“…Furthermore, we use the fact that a producer transfers all her money to the active consumer. The interpretations of (24) and (25) are similar to their counterparts in Proposition 1. It is interesting to compare (24) to its counterpart (21).…”

“…It is easy to show that Proposition 4 still holds when producers bear all the tax burden. 25 Societal bene…ts of illiquid bonds. In our model, money and bonds are risk-free nominal instruments issued by the central bank.…”

“…Using (4) updated one period, we obtain (24). Derivation of (25). In a type-II equilibrium, the marginal value of bonds of an agent entering the secondary bond market, before the realization of the idiosyncratic shock, is…”

Centralized Trading of Corporate Bonds

“…For our model specifications, we apply the basic environment analyzed in Huber and Kim (2015). 8 Time is discrete and the economy is populated by a [0, 1]-continuum of infinitely lived agents.…”

“…10 Any firm can enter the market, but there is a cost 8 Our model builds on Lagos and Wright (2005) and especially on Berentsen et al (2007Berentsen et al ( , 2014Berentsen et al ( , and 2015. The main difference to our previous work (Huber and Kim 2015) is that we analyze the optimal structure of corporate bond markets instead of central bank purchases of government bonds. 9 Our firms have some similarities to the ones studied in , Mortensen and Pissaridies (1994), and Williamson (1987Williamson ( , 2012.…”