01695cas a2200253 a 4500 AALejournalIMF013488 230101c9999 xx r poo 0 0eng d 5.00 USD 9781484392331 1018-5941 BD-DhAAL BD-DhAAL Espinoza, Raphael. Monetary Transaction Costs and the Term Premium / Raphael Espinoza, Dimitrios P. Tsomocos. Washington, D.C. : International Monetary Fund, 2013. 1 online resource (38 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students We show that, in a monetary equilibrium, trade and asset prices depend on both the supply of the liquidity by the Central Bank and the liquidity of assets and commodities. As a result, monetary aggregates are informative for the conduct of monetary policy. We also show asset prices are higher in liquidity-constrained states of nature. This generates a term premium even in absence of aggregate uncertainty. These results hold in any monetary economy with heterogeneous agents and short-term liquidity effects, where monetary costs act as transaction costs and the quantity theory of money is verified. Mode of access: Internet Tsomocos, Dimitrios P. IMF Working Papers; Working Paper ; No. 2013/085 Full text available on IMF http://elibrary.imf.org/view/journals/001/2013/085/001.2013.issue-085-en.xml IMF e-Library