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Monetary Policy with Heterogeneous Agents

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Listed author(s):
  • Makoto Nakajima

    (Federal Reserve Bank of Philadelphia)

Abstract

We build a New Keynesian model in which heterogeneous workers differ with regard to their employment status due to search and matching frictions in the labor market, their potential labor income, and their amount of savings. We use this laboratory to quantitatively assess who stands to win or lose from unanticipated monetary accommodation and who benefits most from systematic monetary stabilization policy. We find substantial redistribution effects of monetary policy shocks; a contractionary monetary policy shock increases income and welfare of the wealthiest 5 percent, while the remaining 95 percent experience lower income and welfare. Consequently, the negative effect of a contractionary monetary policy shock to social welfare is larger if heterogeneity is taken into account.

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File URL: https://economicdynamics.org/meetpapers/2013/paper_356.pdf
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Paper provided by Society for Economic Dynamics in its series 2013 Meeting Papers with number 356.

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Date of creation: 2013
Handle: RePEc:red:sed013:356
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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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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Monetary policy with heterogeneous agents
    by Christian Zimmermann in NEP-DGE blog on 2012-10-05 14:46:19
  2. Lecturas Recomendadas de Política Monetaria
    by Alejandro Villagomez in Tintero Económico Diario on 2012-10-07 00:00:00
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