Optimal monetary policy and liquidity with heterogeneous households

Bilbiie, Florin Ovidiu; Ragot, Xavier

doi:10.1016/j.red.2020.10.003

Cited by 45 publications

(35 citation statements)

References 78 publications

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“…See Garcia-Macia et al (2019) for evidence supporting the notion that creative accumulation is the main driving force of innovation 12. Our results are robust to allowing for population growth.…”

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confidence: 80%

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Dynamic effects of patent policy on innovation and inequality in a Schumpeterian economy

et al. 2021

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This study explores the dynamic e¤ects of patent policy on innovation and income inequality in a Schumpeterian growth model with endogenous market structure and heterogeneous households. We …nd that strengthening patent protection has a positive e¤ect on economic growth and a positive or an inverted-U e¤ect on income inequality when the number of di¤erentiated products is …xed in the short run. However, when the number of products adjusts endogenously, the e¤ects of patent protection on growth and inequality become negative in the long run. We also calibrate the model to US data to perform a quantitative analysis and …nd that the long-run negative e¤ect of patent policy on inequality is much larger than its short-run positive e¤ect. This result remains consistent with our empirical …nding from a panel vector autoregression.

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confidence: 80%

“…Household h supplies L units of labor to earn a real wage rate w t . 12 From standard dynamic optimization, the familiar Euler equation is…”

Section: Heterogeneous Householdsmentioning

confidence: 99%

Dynamic effects of patent policy on innovation and inequality in a Schumpeterian economy

et al. 2021

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“…Moreover, this simplified approach can be generalized further by various ways. See, e.g., the recent work by Challe, Matheron, Ragot, and Rubio-Ramirez (2017), Le Grand and Ragot (2019), and Bilbiie and Ragot (2020).…”

Section: A Recent Work Bymentioning

confidence: 99%

Are Unconditional Lump-sum Transfers a Good Idea?

Chen

Chien

Wen

et al. 2021

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We adopt an analytically tractable Aiyagari-type model to study the distinctive roles of unconditional lump-sum transfers and public debt in reducing consumption inequality due to uninsurable income risk. We show that in the absence of wealth inequality, using lump-sum transfers is not an optimal policy for reducing consumption inequality-because the Ramsey planner opts to rely solely on public debt to mitigate income risk without the need for lump-sum transfers. This result is surprising in light of the popularity of universal basic income advocated by many politicians and scholars.

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“…Related literature. Our paper relates, first, to a burgeoning literature exploring the implications of micro-level heterogeneity for business cycle dynamics and the transmission mechanism of monetary policy, important examples of which include Kaplan et al (2018), Auclert (2019) and Bilbiie (2008), among others, and for the implementation of optimal policy, e.g., Challe et al (2017), Acharya, Challe, andDogra (2020), Bhandari et al (2018), Bilbiie and Ragot (2020), Bilbiie (2018) and Nuño et al (2017). 2 The focus of this work has in large part been on the role of household heterogeneity due to incomplete sharing of idiosyncratic risk in determining the consumption response to policy.…”

Section: Introductionmentioning

confidence: 99%

Risk-Taking, Capital Allocation and Optimal Monetary Policy

David

Zeke

2021

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We study the role of firm heterogeneity in affecting business cycle dynamics and optimal stabilization policy. Firms differ in their degree of cyclicality, and hence, exposure to aggregate risk, leading to firm-specific risk premia that influence resource allocations. The heterogeneous firm economy can be recast in a representative firm formulation, but where total factor productivity (TFP) is endogenous and depends on the resource allocation. The model uncovers a novel tradeoff between the long-run level and volatility of TFP. Inefficiencies distort this tradeoff and result in either excessive volatility or depressed output, implying a role for corrective policy. Embedding this mechanism into a workhorse New Keynesian model, we show that allocational considerations can strengthen the incentives for leaning against the wind, i.e., optimal policy is more strongly countercyclical than in an observationally equivalent economy that abstracts from heterogeneity. A quantitative exercise suggests that the losses from ignoring heterogeneity can be substantial, which stem largely from a less productive allocation of resources and so depressed TFP and output.

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Optimal monetary policy and liquidity with heterogeneous households

Cited by 45 publications

References 78 publications

Dynamic effects of patent policy on innovation and inequality in a Schumpeterian economy

Dynamic effects of patent policy on innovation and inequality in a Schumpeterian economy

Are Unconditional Lump-sum Transfers a Good Idea?

Risk-Taking, Capital Allocation and Optimal Monetary Policy

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