Journal of Economic Theory and Econometrics: Journal of the Korean Econometric Society
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Journal of Economic Theory and Econometrics
JETEM/계량경제학보/計量經濟學報/JKES
Journal of the Korean Econometric Society

Redistribution and Optimal Monetary Policy

Vol.29, No.4, December , 61–80



  •   (University of Melbourne)

  •   (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.


Keywords
   optimal monetary policy, consumption dispersion, countercyclical transfers

JEL classification codes
   D63, E52
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