This paper characterizes optimal fiscal and monetary policy in a new keynesian model with sectorial heterogeneity in price stickiness. In particular, we (i) derive a purely quadratic welfare-based loss function from an approximation of the representative agent's utility function and (ii) provide...

This is the complete technical appendix to "Optimal Fiscal and Monetary Policy under Sectorial Heterogeneity".

This paper incorporates Rational Inattention as defined by Sims (2003a) to a traditional RBC model with multiple sources of uncertainty. Our model distinguishes between transitory and permanent labor and relative investment productivity shocks. The introduction of information frictions works as...

What measure of inflation a Central Bank should respond to? This paper characterizes the optimal targeting index in a multisectorial economy with Calvo-pricing, defined as a composition of sectorial inflations that maximizes a selected welfare criterion. This is a purely quadratic approximation...

This p aper explores the interaction between a credit crunch and the maturity of government debt, focusing on its impacts on an economy with heterogeneous house holds. We find that an increase in debt maturity helps softening the economicslump that follows a credit crisis. We show that,...

Expansionary fiscal policies have been advocated to induce output expansions and inflation in deep recession or deflationary episodes. We show that, in a fiscalist setup, an increase in deficits can trigger a stagflation by negatively affecting financial intermediation of resources to...

The last decade has witnessed two groundbreaking developments in monetary economics: The growth in digital private currencies and negative interest rate policies (NIRP), leaving the zero lower bound no longer binding. These developments have introduced two parallel discussions surrounding the...

Abstract Negative interest rates policies (NIRP), usually depicted in economic textbooks as an impossibility due to the prospect of infinite demand for money, are now a reality in several countries due to different reasons. But while the ZLB has been surpassed when it comes to Central Banks, it...

We derive a measure of the degree of inefficiency of the production structure of an economy by casting its optimal sectoral composition as the outcome of a portfolio allocation problem, in the spirit of Koren and Tenreyro (2004). We use the framework to construct measures of inefficiency using...

Expansionary fiscal policies have been advocated to induce output expansions and inflation in deep recession or deationary episodes. We show that, in a fiscalist setup, an increase in deficits can trigger a stagation by negatively affecting financial intermediation of resources to investments....