Should monetary policy respond to asset prices? This paper analyzes this question from the vantage point of equilibrium determinacy. A central bank responding to asset prices is indirectly responding to firm profits. In a model with sticky prices, increases in inflation tend to lower firm...

(Copyright: Elsevier)

We study the effects of credit shocks in a model with heterogeneous entrepreneurs, financing constraints, and a realistic firm-size distribution. As entrepreneurial firms can grow only slowly and rely heavily on retained earnings to expand the size of their business, we show that, by reducing...

We study a simple model of production, accumulation, and redistribution, where agents are heterogeneous in their initial wealth, and a sequence of redistributive tax rates is voted upon. Though the policy is infinite-dimensional, we prove that a median voter theorem holds if households have...

This paper analyzes the effects of intergenerational conflict on capital and labor income tax rates, transfers, and government spending in a model of multidimensional policy choice. The different nature of tax liabilities for the young and the old can explain why the old receive large gross...

Do exogenous money growth rules produce price level determinacy? This is a classic topic in monetary theory. This paper contributes to this literature by examining the effect of money demand timing. The paper demonstrates how conditions for determinacy vary depneding upon whether the theoretical...

This paper demonstrates that in a standard flexible-price monetary model there exists real indeterminacy whenever the nominal interest rate moves too closely with either current or forecasted inflation. However, an aggressive response to lagged inflation will ensure determinacy. These...