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Optimal monetary policy in a model with agency costs

  • Timothy Fuerst

    (Bowling Green State University)

  • Matthias Paustian

    (Bank of England)

  • Charles Carlstorm

    (Federal Reserve Bank of Cleveland)

is the optimal policy. We derive the targeting criterion that implements optimal monetary policy under commitment and show under what conditions the target depends on leads or lags of the risk premium. Finally, the paper demonstrates that the degree of price stickiness and/or the nature of monetary policy alter the endogenous propagation of net worth across time.

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File URL: https://www.economicdynamics.org/meetpapers/2009/paper_667.pdf
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Paper provided by Society for Economic Dynamics in its series 2009 Meeting Papers with number 667.

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Date of creation: 2009
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Handle: RePEc:red:sed009:667
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  1. Benjamin Keen & Yongsheng Wang, 2007. "What is a realistic value for price adjustment costs in New Keynesian models?," Applied Economics Letters, Taylor & Francis Journals, vol. 14(11), pages 789-793.
  2. Charles T. Carlstrom & Timothy S. Fuerst, 2004. "Asset prices, nominal rigidities, and monetary policy," Working Paper 0413, Federal Reserve Bank of Cleveland.
  3. Fiorella De Fiore & Oreste Tristani, 2013. "Optimal Monetary Policy in a Model of the Credit Channel," Economic Journal, Royal Economic Society, vol. 123(571), pages 906-931, 09.
  4. Faia, Ester & Monacelli, Tommaso, 2007. "Optimal interest rate rules, asset prices, and credit frictions," Journal of Economic Dynamics and Control, Elsevier, vol. 31(10), pages 3228-3254, October.
  5. Matteo Iacoviello, 2002. "House prices, borrowing constraints and monetary policy in the business cycle," Boston College Working Papers in Economics 542, Boston College Department of Economics, revised 06 Dec 2004.
  6. Marvin Goodfriend & Bennett T. McCallum, 2007. "Banking and interest rates in monetary policy analysis: a quantitative exploration," Proceedings, Federal Reserve Bank of San Francisco.
  7. Gilchrist, Simon & Leahy, John V., 2002. "Monetary policy and asset prices," Journal of Monetary Economics, Elsevier, vol. 49(1), pages 75-97, January.
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