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16
Optimal Monetary Policy For The Masses
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Link to paper right here. From James Bullard and Riccardo DiCecio at the St. Louis Fed.
Key Points
- Studies Nominal GDP Level targets in a model with credit market frictions (as opposed to sticky price friction)
- Credit market frictions are non-state contingent nominal contracts (NSCNC). More simply, contracts with nominal payment streams specified beforehand.
- Introduces household heterogeneity (both between and within cohorts), building off previous work (see Optimal Monetary Policy At The Zero Lower Bound 2015). Model intra-cohort heterogeneity could be roughly similar to current US levels (measured by Gini).
- NGDPLT achieves optimal risk-sharing, corrects NSCNC distortion
I'm still working my way through this, will update if I think I found anything else really important. Model itself is very simple, but the paper is a bit technical. I'm trying to determine if they kept the credit market non-participant section from the first model (I don't believe they did).
More flippant comment: priors confirmed.
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