Optimal monetary policy under incomplete markets and aggregate uncertainty: A long-run perspective |
| |
Authors: | Oleksiy KryvtsovMalik Shukayev Alexander Ueberfeldt |
| |
Affiliation: | Bank of Canada, Canada |
| |
Abstract: | This paper examines the role of monetary policy in an environment with aggregate risk and incomplete markets. In a two-period overlapping-generations model with aggregate uncertainty, optimal monetary policy attains the ex-ante Pareto optimal allocation. This policy aims to stabilize the savings rate in the economy by changing real returns of nominal bonds via variation in expected inflation. Optimal expected inflation is procylical and on average higher than without uncertainty. Simple inflation targeting rules closely approximate the optimal monetary policy. |
| |
Keywords: | Optimal monetary policy Inflation targeting |
本文献已被 ScienceDirect 等数据库收录! |