This paper studies the implications for optimal monetary policy associated to the wealth effects induced by stock-price dynamics within a non-Ricardian framework. We use a new Keynesian model incorporating households with perpetual youth to study whether a monetary rule responding to asset price...

This paper studies the implications for optimal monetary policy associated to the wealth effects induced by stock-price dynamics within a non-Ricardian framework. We use a new Keynesian model incorporating households with perpetual youth to study whether a monetary rule responding to asset price...

Central banks wish to avoid self-fulfilling fluctuations. Interest rate rules with a unit response to real rates achieve this under the weakest possible assumptions about the behaviour of households and firms. They are robust to household heterogeneity, hand-to-mouth consumers, non-rational...

This work is based on a new Keynesian theoretical model for an advanced economy, which incorporates overlapping generations to analyze a channel through which fluctuations in household financial wealth influence aggregate demand. The optimal monetary policy, corresponding to that of a central...

Among LawMacro scholars, there is a growing interest in the incorporation of distributional goals into economic institutions and policies, especially central banks. We argue that this approach threatens to undermine the rule of law in monetary policy. This is troubling because the rule of law is...

This work is based on a new Keynesian theoretical model for an advanced economy, which incorporates overlapping generations to analyze a channel through which fluctuations in household financial wealth influence aggregate demand. The optimal monetary policy, corresponding to that of a central...

Among LawMacro scholars, there is a growing interest in the incorporation of distributional goals into economic institutions and policies, especially central banks. We argue that this approach threatens to undermine the rule of law in monetary policy. This is troubling because the rule of law is...