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Journal of Economic Theory and Econometrics
Journal of the Korean Econometric Society
Redistribution and Optimal Monetary Policy
Vol.29, No.4, December 2018, 61–80
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Daeha Cho
(University of Melbourne)
Kwang Hwan Kim
(Yonsei University)
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Abstract
This paper departs from the representative-agent assumption and investigates how optimal monetary policy should be conducted in a two-agent New Keynesian (TANK) model. Relative to a price stability motive that typically appears as policy prescriptions in representative-agent New Keynesian (RANK) models, heterogeneity adds a motive to spread aggregate fluctuations equally across all households. We show that the latter motive hinges on how fiscal transfers are implemented with the business cycle.
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Keywords
optimal monetary policy, consumption dispersion, countercyclical transfers |
JEL classification codes
D63, E52 |
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