Aggregate implications of micro asset market segmentation

Aggregate Implications of Micro Asset Market Segmentation∗

This paper develops a consumption-based asset pricing model to explain and quantify the aggregate implications of a frictional financial system, comprised of many financial markets partially integrated with one-another. Each of our micro financial markets is inhabited by traders who are specialized in that market’s type of asset. We specify exogenously the level of segmentation that ultimately ...

Endogenous asset market segmentation

Agents and endowments. There is a continuum of ex ante identical households, a large number of perfectly competitive financial intermediaries, and a government. As in a typical cash-inadvance economy each household splits into a worker and a shopper each period. Each period each household receives an idiosyncratic endowment y ∈ [0,∞) that is IID in the population and IID over time with density ...

Aggregate Asset Pricing with Labor Market Frictions ∗

Even though labor income represents about two thirds of disposal income to household, its role has largely been neglected by asset pricing models. In this paper, we solve a general equilibrium model which can both rationalize important feature of labor markets as well as financial markets. To this end, we embed labor market search frictions into a business cycle model where the representative h...

Endogenous asset market segmentation : interest rate dynamics

Implications of the Imperfect Deposit Market Structure for Micro and Macro Discretionary Prudential Policies

The aim of this study is to theoretically investigate the role of the bank deposit market structure in how effective micro and macro prudential policies in determining the regulatory capital of banks in combination with monetary policy. To achieve this, a partial equilibrium analytical framework has been developed that includes rational economic entities and the possibility of contagion risk in...