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Heterogeneous Consumers, Demand Regimes, Monetary Policy and Equilibrium Determinacy

  • Giovanni Di Bartolomeo

    (University of Teramo)

  • Lorenza Rossi

    (Catholic University of Milan and University of Crete)

This paper investigates the effects of monetary policy in presence of heterogeneous consumers. We study the effectiveness (quantitative effects) of monetary policy and equilibrium determinacy properties of a New Keynesian DSGE model where a fraction of households cannot smooth consumption. We show that twodemand regimes can emerge (according to the «slope» of IS curve) and that the main unconventional results, stressed by recent literature, only hold in the unconventional case of an IS curve positively sloped.

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Article provided by SIPI Spa in its journal Rivista di Politica Economica.

Volume (Year): 97 (2007)
Issue (Month): 5 (September-October)
Pages: 111-142

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Handle: RePEc:rpo:ripoec:v:97:y:2007:i:5:p:111-142
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  10. V. Anton Muscatelli & Patrizio Tirelli & Carmine Trescroci, 2003. "Fiscal and Monetary policy Interactions in a New Keynesian Model with Liquidity Constraints," Working Papers 2005_19, Business School - Economics, University of Glasgow, revised Apr 2005.
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