The Time Consistency of Optimal Monetary Policy with Heterogeneous Agents
Stefania Albanesi ()
Macroeconomics from University Library of Munich, Germany
This paper studies the structure and time consistency of optimal monetary policy from a public finance perspective in an economy where agents differ in preference for liquidity and holdings of nominal assets. I find that the presence of distributional effects breaks the link between time consistency and high inflation, which characterizes representative agent models. For a large class of economies, optimal monetary policy is time consistent. I relate these findings to key historical episodes of inflation and deflation.
Keywords: Inflation; Distribution; Heterogeneity (search for similar items in EconPapers)
JEL-codes: E4 E5 E6 (search for similar items in EconPapers)
Pages: 31 pages
New Economics Papers: this item is included in nep-cba, nep-dge, nep-mac and nep-mon
Note: Type of Document - Acrobat PDF; prepared on IBM PC ; to print on HP; pages: 31 ; figures: included. 31 pages PDF format
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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpma:0201003
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