When the central bank is the sole policymaker, the combination of limited asset market participation and consumption habits can have dramatic implications for the optimal monetary policy rule and for stability properties of a business cycle model characterized by price and nominal wage rigidities. In this framework, a simple countercyclical fiscal rule plays a twofold role. On the one hand it ensures uniqueness of the rational expectations equilibrium when monetary policy follows a standard Taylor rule. On the other hand it brings aggregate dynamics substantially closer to their socially efficient levels

Motta, G., Tirelli, P. (2012). Optimal Simple Monetary and Fiscal Rules under Limited Asset Market Partecipation. JOURNAL OF MONEY, CREDIT, AND BANKING, 44(7), 1351-1374 [10.1111/j.1538-4616.2012.00535.x].

Optimal Simple Monetary and Fiscal Rules under Limited Asset Market Partecipation

MOTTA, GIORGIO ENRICO;TIRELLI, PATRIZIO
2012

Abstract

When the central bank is the sole policymaker, the combination of limited asset market participation and consumption habits can have dramatic implications for the optimal monetary policy rule and for stability properties of a business cycle model characterized by price and nominal wage rigidities. In this framework, a simple countercyclical fiscal rule plays a twofold role. On the one hand it ensures uniqueness of the rational expectations equilibrium when monetary policy follows a standard Taylor rule. On the other hand it brings aggregate dynamics substantially closer to their socially efficient levels
Articolo in rivista - Articolo scientifico
Rule of Thumb Consumers; DSGE; Determinacy; Limited Asset Market Participation; Taylor Principle; Optimal Simple Rule
English
2012
44
7
1351
1374
none
Motta, G., Tirelli, P. (2012). Optimal Simple Monetary and Fiscal Rules under Limited Asset Market Partecipation. JOURNAL OF MONEY, CREDIT, AND BANKING, 44(7), 1351-1374 [10.1111/j.1538-4616.2012.00535.x].
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/10281/37325
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