Inequality, Business Cycles, and Monetary-Fiscal Policy /
Bhandari, Anmol.
Inequality, Business Cycles, and Monetary-Fiscal Policy / Anmol Bhandari, David Evans, Mikhail Golosov, Thomas J. Sargent. - Cambridge, Mass. National Bureau of Economic Research 2018. - 1 online resource: illustrations (black and white); - NBER working paper series no. w24710 . - Working Paper Series (National Bureau of Economic Research) no. w24710. .
June 2018.
We study optimal monetary and fiscal policy in a model with heterogeneous agents, incomplete markets, and nominal rigidities. We develop numerical techniques to approximate Ramsey plans and apply them to a calibrated economy to compute optimal responses of nominal interest rates and labor tax rates to aggregate shocks. Responses differ qualitatively from those in a representative agent economy and are an order of magnitude larger. Taylor rules poorly approximate the Ramsey optimal nominal interest rate. Conventional price stabilization motives are swamped by an across person insurance motive that arises from heterogeneity and incomplete markets.
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Mode of access: World Wide Web.
Inequality, Business Cycles, and Monetary-Fiscal Policy / Anmol Bhandari, David Evans, Mikhail Golosov, Thomas J. Sargent. - Cambridge, Mass. National Bureau of Economic Research 2018. - 1 online resource: illustrations (black and white); - NBER working paper series no. w24710 . - Working Paper Series (National Bureau of Economic Research) no. w24710. .
June 2018.
We study optimal monetary and fiscal policy in a model with heterogeneous agents, incomplete markets, and nominal rigidities. We develop numerical techniques to approximate Ramsey plans and apply them to a calibrated economy to compute optimal responses of nominal interest rates and labor tax rates to aggregate shocks. Responses differ qualitatively from those in a representative agent economy and are an order of magnitude larger. Taylor rules poorly approximate the Ramsey optimal nominal interest rate. Conventional price stabilization motives are swamped by an across person insurance motive that arises from heterogeneity and incomplete markets.
System requirements: Adobe [Acrobat] Reader required for PDF files.
Mode of access: World Wide Web.