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Redistributive Policy Shocks And Monetary Policy With Heterogeneous Agents

Ojasvita Bahl, Chetan Ghate () and Debdulal Mallick ()

No 455, IEG Working Papers from Institute of Economic Growth

Abstract: Governments in EMDEs routinely intervene in agriculture markets to stabilize food prices in the wake of adverse shocks. Such interventions usually 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 inflation and the distribution of consumption amongst rich and poor households? We build a tractable two-sector-two-agent NK DSGE model calibrated 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.

Keywords: TANK models; Inflation Targeting; Emerging Market and Developing Economies; Procurement and Redistribution; DSGE. (search for similar items in EconPapers)
JEL-codes: E31 E32 E44 E52 E63 (search for similar items in EconPapers)
Pages: 62 pages
Date: 2022-09-01
New Economics Papers: this item is included in nep-ban, nep-cba, nep-dge and nep-mon
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Published as Institute of Economic Growth, Delhi, September 2022, pages 1-62

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Related works:
Working Paper: Redistributive Policy Shocks and Monetary Policy with Heterogeneous Agents (2020) Downloads
Working Paper: Redistributive Policy Shocks and Monetary Policy with Heterogeneous Agents (2020) Downloads
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