Optimal monetary policy in a model with agency costs
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.
|Date of creation:||2009|
|Date of revision:|
|Contact details of provider:|| Postal: Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA|
Web page: http://www.EconomicDynamics.org/
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