Optimal Policy for Macrofinancial Stability

Gianluca Benigno, Huigang Chen, Christopher Otrok, Alessandro Rebucci () and Eric Young

American Economic Journal: Macroeconomics, 2023, vol. 15, issue 4, 401-28

Abstract: There is a new and now large literature analyzing government policies for financial stability based on models with endogenous borrowing constraints. These normative analyses build upon the concept of constrained efficient allocation where the social planner is constrained by the same borrowing limit that agents face. In this paper, we show that there exists at least one set of tools implementing the constrained efficient allocation that can also be used by a Ramsey planner to replicate an unconstrained allocation, achieving higher welfare. Constrained efficiency may lead to inaccurate characterizations of welfare maximizing policies relative to Ramsey optimal policy.

JEL-codes: E32 E44 E61 G01 H21 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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Related works:
Working Paper: Optimal Policy for Macro-Financial Stability (2019)
Working Paper: Optimal Policy for Macro-Financial Stability (2019)
Working Paper: Optimal Policy for Macro-Financial Stability (2013)
Working Paper: Optimal Policy for Macro-Financial Stability (2012)
Working Paper: Optimal Policy for Macro-Financial Stability (2012)
Working Paper: Optimal policy for macro-financial stability (2012)
Working Paper: Optimal policy for macro-financial stability (2012)
Working Paper: Optimal Policy for Macro-Financial Stability (2012)
Working Paper: Optimal Policy for Macro-Financial Stability (2012)
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DOI: 10.1257/mac.20200046

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