IDEAS home Printed from https://ideas.repec.org/a/cje/issued/v51y2018i3p747-783.html
   My bibliography  Save this article

Monetary and fiscal policies in a heterogeneous-agent economy

Author

Listed:
  • Hongfei Sun
  • Chenggang Zhou

Abstract

We study the effects of long-run inflation and income taxation in an economy where households face uninsurable idiosyncratic risks. We construct a tractable competitive-search framework that generates dispersion of prices, income and wealth. We analytically characterize the stationary equilibrium and the policy effects on individual choices. Quantitative analysis finds that monetary and fiscal policies have distinct effects on macro aggregates, such as output, savings and wealth, income and consumption inequalities. There is a hump-shaped relationship between welfare and the respective policies. Overall, welfare is maximized by a deviation from the Friedman rule, paired with distortionary income taxation.

Suggested Citation

  • Hongfei Sun & Chenggang Zhou, 2018. "Monetary and fiscal policies in a heterogeneous-agent economy," Canadian Journal of Economics, Canadian Economics Association, vol. 51(3), pages 747-783, August.
    • Handle: RePEc:cje:issued:v:51:y:2018:i:3:p:747-783
    DOI: 10.1111/caje.12337
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/caje.12337
    Download Restriction: access restricted to subscribers
    File URL: https://libkey.io/10.1111/caje.12337?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Beverly Lapham & Ayman Mnasri, 2019. "Exchange Rate Pass-Through: A Competitive Search Approach," Working Paper 1418, Economics Department, Queen's University.
    2. Jonathan Chiu & Miguel Molico, 2021. "Short-Run Dynamics in a Search-Theoretic Model of Monetary Exchange," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 42, pages 133-155, October.
    3. Jonathan Chiu & Miguel Molico, 2021. "Short-Run Dynamics in a Search-Theoretic Model of Monetary Exchange," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 42, pages 133-155, October.
    4. Ayman Mnasri & Beverly Lapham, 2023. "A competitive search approach to exchange rate pass-through," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 76(1), pages 153-201, July.

    More about this item

    JEL classification:

    • E0 - Macroeconomics and Monetary Economics - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cje:issued:v:51:y:2018:i:3:p:747-783. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Prof. Werner Antweiler (email available below). General contact details of provider: https://edirc.repec.org/data/ceaaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.