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| Type | Working Paper |
| Scope | Discipline-based scholarship |
| Title | Redistributive Inflation and Optimal Monetary Policy |
| Organization Unit | |
| Authors |
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| Language |
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| Institution | University of Zurich |
| Series Name | SSRN |
| Number | 4275770 |
| ISSN | 1556-5068 |
| Number of Pages | 41 |
| Date | 2023 |
| Abstract Text | Inflation has heterogeneous impacts on households, which then affects optimal monetary policy design. I study optimal monetary policy rules in a quantitative heterogeneous agent New Keynesian (HANK) model where inflation has redistributive effects on households through their different (1) consumption baskets, (2) nominal wealth positions, and (3) earnings elasticities to business cycles. I parameterize the model based on the empirical analysis of these channels using the most recent data. Unlike in representative agent models, a utilitarian central bank should adopt an asymmetric monetary policy rule that is accommodative towards inflation and aggressive towards deflation. Specifically, by accommodating stronger demand and higher inflation, the central bank benefits low-income and low-wealth households through nominal debt devaluation and higher earnings growth. |
| Free access at | DOI |
| Digital Object Identifier | 10.2139/ssrn.4275770 |
| Other Identification Number | merlin-id:23977 |
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