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- Publisher
- Wiley
- Copyright
- Copyright © 2011 Wiley Subscription Services, Inc., A Wiley Company
- ISSN
- 0008-4085
- eISSN
- 1540-5982
- DOI
- 10.1111/j.1540-5982.2010.01626.x
- Publisher site
- See Article on Publisher Site
Abstract
Abstract Kocherlakota (2003) provides an example of a monetary economy where efficiency is enhanced with the introduction of a nominally risk‐free bond that is specifically designed to be illiquid. The societal benefit of an illiquid bond in his example, however, is transitory, and he does not characterize an optimal policy. I use an analytically tractable framework to characterize an optimal intervention and to show that the purported benefits of an illiquid bond market persist in a steady state.
Journal
Canadian Journal of Economics/Revue Canadienne D'économique – Wiley
Published: Feb 1, 2011
Keywords: ;