Redistributive Policy Shocks and Monetary Policy with Heterogeneous Agents

Ojasvita Bahl, Chetan Ghate and Debdulal Mallick

MPRA Paper from University Library of Munich, Germany

Abstract: Governments in EMDEs routinely intervene in agriculture markets to stabilize food prices in the wake of adverse domestic or external shocks. Such interventions typically involve a large increase in the procurement and redistribution of food, which we call a redistributive policy shock. What is the impact of a redistributive policy shock on the sectoral and aggregate dynamics of inflation, and the distribution of consumption amongst rich and poor households? To address this, we build a tractable two-sector (agriculture and manufacturing) two-agent (rich and poor) New Keynesian DSGE model with redistributive policy shocks. We calibrate the model to the Indian economy. We show that for an inflation targeting central bank, consumer heterogeneity matters for whether monetary policy responses to a variety of shocks raises aggregate welfare or not. Our paper contributes to a growing literature on understanding the role of consumer heterogeneity in monetary policy.

Keywords: TANK models; HANK Models; Inflation Targeting; Emerging Market and Developing Economies; Food Security; Procurement and Redistribution; DSGE. (search for similar items in EconPapers)
JEL-codes: E31 E32 E44 E52 E63 (search for similar items in EconPapers)
Date: 2020-07-07
New Economics Papers: this item is included in nep-cba, nep-dge, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/101651/1/MPRA_paper_101651.pdf original version (application/pdf)

Related works:
Working Paper: Redistributive Policy Shocks and Monetary Policy with Heterogeneous Agents (2024)
Working Paper: Redistributive Policy Shocks And Monetary Policy With Heterogeneous Agents (2022)
Working Paper: Redistributive Policy Shocks and Monetary Policy with Heterogeneous Agents (2020)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:101651

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().