Heterogeneity and Redistribution: By Monetary or Fiscal Means?
In models with heterogeneous agents, issues of distribution and redistribution jump to the fore, raising the question: which policies--monetary or fiscal--work most effectively in transferring income from one group to another? To begin answering this question, this note works through a series of examples using Townsend's turnpike model. Two basic results emerge. First, the zero lower bound on nominal interest rates often appears as an obstacle to redistribution by monetary means. Second, assumptions made about the government's ability to raise tax revenue without distortion and to discriminate between agent types in distributing that tax revenue play a large role in determining whether agents prefer to redistribute income by monetary or fiscal means.
|Date of creation:||17 May 2004|
|Date of revision:|
|Contact details of provider:|| Postal: Boston College, 140 Commonwealth Avenue, Chestnut Hill MA 02467 USA|
Web page: http://fmwww.bc.edu/EC/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- V. V. Chari & Patrick J. Kehoe, 1998.
"Optimal fiscal and monetary policy,"
251, Federal Reserve Bank of Minneapolis.
When requesting a correction, please mention this item's handle: RePEc:boc:bocoec:595. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christopher F Baum)
If references are entirely missing, you can add them using this form.