Optimal monetary policy according to HANK

Arbeitspapier

We study optimal monetary policy in a heterogeneous agent new Keynesian economy. A utilitarian planner seeks to reduce consumption inequality, in addition to stabilizing output gaps and inflation. The planner does so both by reducing income risk faced by households, and by reducing the pass-through from income to consumption risk, trading off the benefits of lower inequality against productive inefficiency and higher inflation. When income risk is countercyclical, policy curtails the fall in output in recessions to mitigate the increase in inequality. We uncover a new form of time inconsistency of the Ramsey plan-the temptation to exploit households' unhedged interest rate exposure to lower inequality.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: Staff Report ; No. 916

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Macroeconomics: Consumption; Saving; Wealth ; Prices, Business Fluctuations, and Cycles: General (includes Measurement and Data) ; Monetary Policy ; Fiscal Policy
• Thema: new Keynesian model ; incomplete markets ; optimal monetary policy

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Acharya, Sushant ; Challe, Edouard ; Dogra, Keshav
• Ereignis: Veröffentlichung
• (wer): Federal Reserve Bank of New York
• (wo): New York, NY
• (wann): 2020

Weitere Informationen

• Handle: http://hdl.handle.net/10419/241109
• Letzte Aktualisierung: 10.03.2025, 11:45 MEZ