We study optimal policy design in a monetary model with heterogeneous preferences. In the model, financial markets are incomplete and households are heterogeneous with respect to their current consumption preferences and discount factors. The government controls the supply of money (liquid) and...

We study optimal policy design in a monetary model with heterogeneous preferences. In the model markets are incomplete and households are heterogeneous with respect to their current consumption preferences and discount factors. The government controls the supply of money (liquid) and nominal...

Euler equations are the key link between monetary policy and the real economy in NK models. Under separable preferences, they fail to match interest rates. Non-separability between leisure and consumption significantly improves their fit and reliability for studying monetary policy.

We challenge the view that the negative correlation between the Federal Funds and the Euler equation interest rate is linked to monetary policy. Using Monte Carlo experiments, we show that the negative correlation can be explained by risk premium disturbances.

This paper develops an open economy portfolio balance model with endogenous asset supply. Domestic producers choose an optimal capital structure and finance capital goods through credit, bonds and equity assets. Private households hold a portfolio of domestic and foreign assets, shift balances...

The main purpose of this study is to explore the potential expansionary effect stemming from the monetization of debt. We develop a simple macroeconomic model with Keynesian features and four sectors: creditor households, debtor households, businesses, and the public sector. We show that such...

This paper challenges the view that the observed negative correlation between the Federal Funds rate and the interest rate implied by consumption Euler equations is systematically linked to monetary policy. By using a Monte Carlo experiment, we show that stochastic risk premium disturbances have...

This paper develops an open economy portfolio balance model with endogenous asset supply. Domestic producers choose an optimal capital structure and finance capital goods through credit, bonds and equity assets. Private households hold a portfolio of domestic and foreign assets, shift balances...

This paper develops an open economy portfolio balance model with endogenous asset supply. Domestic producers finance capital goods through credit and bonds in accordance with debt capital costs as well as through equity assets. Private households hold a portfolio of domestic and foreign assets,...

The main purpose of this study is to explore the potential expansionary effect stemming from the monetization of debt. We develop a simple macroeconomic model with Keynesian features and four sectors: creditor households, debtor households, businesses, and the public sector. We show that such...