University of Oregon
Institutional Affiliation: University of Oregon
NBER Working Papers and Publications
|June 2018||Inequality, Business Cycles, and Monetary-Fiscal Policy|
with Anmol Bhandari, Mikhail Golosov, Thomas J. Sargent: w24710
We study optimal monetary and fiscal policy in a model with heterogeneous agents, incomplete markets, and nominal rigidities. We develop numerical techniques to approximate Ramsey plans and apply them to a calibrated economy to compute optimal responses of nominal interest rates and labor tax rates to aggregate shocks. Responses differ qualitatively from those in a representative agent economy and are an order of magnitude larger. Taylor rules poorly approximate the Ramsey optimal nominal interest rate. Conventional price stabilization motives are swamped by an across person insurance motive that arises from heterogeneity and incomplete markets.
|September 2013||Taxes, Debts, and Redistributions with Aggregate Shocks|
with Anmol Bhandari, Mikhail Golosov, Thomas J. Sargent: w19470
A planner sets a lump sum transfer and a linear tax on labor income in an economy with incomplete markets, heterogeneous agents, and aggregate shocks. The planner's concerns about redistribution impart a welfare cost to fluctuating transfers. The distribution of net asset holdings across agents affects optimal allocations, transfers, and tax rates, but the level of government debt does not. Two forces shape long-run outcomes: the planner's desire to minimize the welfare costs of fluctuating transfers, which calls for a negative correlation between the distribution of net assets and agents' skills; and the planner's desire to use fluctuations in the real interest rate to adjust for missing state-contingent securities. In a model parameterized to match stylized facts about US booms and reces...