Related papers: Ramsey Optimal Policy versus Multiple Equilibria w…

I characterize optimal government policy in a sticky-price economy with different types of consumers and endogenous financial constraints in the banking and entrepreneurial sectors. The competitive equilibrium allocation is constrained…

We consider the relationship between economic activity and intervention, including monetary and fiscal policy, using a universal dynamic framework. Central bank policies are designed for growth without excess inflation. However,…

This paper investigates the identification, the determinacy and the stability of ad hoc, "quasi-optimal" and optimal policy rules augmented with financial stability indicators (such as asset prices deviations from their fundamental values)…

There is by now a large consensus in modern monetary policy. This consensus has been built upon a dynamic general equilibrium model of optimal monetary policy as developed by, e.g., Goodfriend and King (1997), Clarida et al. (1999),…

The classical theory of efficient allocations of an aggregate endowment in a pure-exchange economy has hitherto primarily focused on the Pareto-efficiency of allocations, under the implicit assumption that transfers between agents are…

We investigate the dynamics of wealth inequality in an economy where households have positional preferences, with the strength of the positional concern determined endogenously by inequality of wealth distribution in the society. We…

We study optimal taxation when citizens hold beliefs about an honest versus opportunistic government and update those beliefs from observed taxes and delivery. In a Ramsey economy with competitive firms, the government privately knows its…

The aim of the present paper is to provide criteria for a central bank of how to choose among different monetary-policy rules when caring about a number of policy targets such as the output gap and expected inflation. Special attention is…

We characterize optimal monetary policy when policy endogenously moves risk premia through redistribution across agents who differ in their willingness to bear risk. The analytical core is Marginal Risk Capacity, the covariance of monetary…

In a dynamic economy, we characterize the fiscal policy of the government when it levies distortionary taxes and issues defaultable bonds to finance its stochastic expenditure. Default may occur in equilibrium as it prevents the government…

With non-controllable auto-regressive shocks, the welfare of Ramsey optimal policy is the solution of a single Riccati equation of a linear quadratic regulator. The existing theory by Hansen and Sargent (2007) refers to an additional…

The paper tests the validity of the critique of the fiscal theory of the price level. A stochastic general equilibrium model with continuous time is constructed. An active fiscal policy and a passive monetary policy have been set. Monetary…

This paper characterizes differentiable subgame perfect equilibria in a continuous time intertemporal decision optimization problem with non-constant discounting. The equilibrium equation takes two different forms, one of which is…

We study a pure-exchange incomplete-market economy with heterogeneous agents. In each period, the agents choose how much to save (i.e., invest in a risk-free bond), how much to consume, and which bundle of goods to consume while their…

We construct continuous-time equilibrium models based on a finite number of exponential utility investors. The investors' income rates as well as the stock's dividend rate are governed by discontinuous Levy processes. Our main result…

This paper characterizes differentiable and subgame Markov perfect equilibria in a continuous time intertemporal decision problem with non-constant discounting. Capturing the idea of non commitment by letting the commitment period being…

For the Ramsey model of economic growth, which describes the optimal allocation of consumption and saving over time, we assume the population dynamics to follow the Allee effect. The so-called Allee threshold separates two regimes from each…

This paper studies a duopoly investment model with uncertainty. There are two alternative irreversible investments. The first firm to invest gets a monopoly benefit for a specified period of time. The second firm to invest gets information…

A minimal central bank credibility, with a non-zero probability of not renegning his commitment ("quasi-commitment"), is a necessary condition for anchoring inflation expectations and stabilizing inflation dynamics. By contrast, a complete…

We prove existence and uniqueness of stochastic equilibria in a class of incomplete continuous-time financial environments where the market participants are exponential utility maximizers with heterogeneous risk-aversion coefficients and…