Abstract
An asset market segmentation model is constructed to explore the distributional effects of monetary policy on theft and the choice of costly credit and money. Money is risky to hold due to theft. Traders who participate in the asset market can have a liquidity insurance against inflation while nontraders cannot. In equilibrium, money is nonneutral. An anticipated money injection always decreases theft and improves welfare of all. However, an unanticipated money injection decreases theft for traders but increases it for nontraders. If the policy effects on nontraders dominate, then there are welfare costs of inflation and the optimal money growth rate is negative.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
