Optimal Monetary Policy with Heterogeneous Agents (Updated September 2019). PDF Download

Are you looking for read ebook online? Search for your book and save it on your Kindle device, PC, phones or tablets. Download Optimal Monetary Policy with Heterogeneous Agents (Updated September 2019). PDF full book. Access full book title Optimal Monetary Policy with Heterogeneous Agents (Updated September 2019). by Galo Nuño. Download full books in PDF and EPUB format.

Optimal Monetary Policy with Heterogeneous Agents (Updated September 2019).

Optimal Monetary Policy with Heterogeneous Agents (Updated September 2019). PDF Author: Galo Nuño
Publisher:
ISBN:
Category :
Languages : en
Pages : 71

Get Book Here

Book Description
We analyze optimal monetary policy under commitment in an economy with uninsurable idiosyncratic risk, long-term nominal claims and costly inflation. Our model features two prominent redistributive channels of monetary policy: the classic Fisherian channel, and unhedged interest rate exposure (URE). The former introduces a “redistributive inflationary bias”, stemming from the fact that debtors (who benefit from inflation) have a higher marginal utility than creditors. This bias is counteracted over time by a disinflationary motive: a commitment to low future inflation raises bond prices, benefiting bond-issuing households (i.e. those with negative URE), who also have a higher marginal utility than bond-purchasing ones. The result is optimal inflation front-loading. Under certain conditions, both motives cancel out asymptotically and optimal long-run inflation is zero. Numerically, we find that optimal policy achieves first-order consumption and welfare redistribution vis-à-vis a zero inflation policy.