We compare the implications of speculation versus hedging channels for bond markets in heterogeneous agents’ economies. Treasuries command a significant risk premium when optimistic agents speculate by leveraging their positions using bonds. Disagreement drives wedge between marginal agent econometrician beliefs (sentiment). When speculative demands dominate, interaction belief heterogeneity an...

In this article, we review the nascent literature on transmission of negative policy rates. We discuss theory how depends bank balance sheets, and changes once rates become negative. growing evidence that are special because pass-through to banks’ retail deposit is hindered by a zero lower bound. summarize existing research impact lending securities portfolios as well their consequences for rea...

This paper integrates monetary search theory with limited participation to analyze the liquidity effect of open market operations. The model features a centralized bonds market with limited participation and a decentralized goods market with random matches. In a fraction of matches, buyers can use unmatured bonds together with money to purchase goods. In other matches, a legal restriction forbi...