Working Papers

Working Papers


Abstract. Idiosyncratic risk and cyclical inequality imply additional channels that amplify the transmission of persistent balance-sheet policies, through their effects on private sector's expectations and consumption risk. Through these channels, unconventional monetary policy improves the central bank's ability to anchor expectations and rule out endogenous instability, whether or not the economy is in a liquidity trap. They also allow the central bank to optimally complement interest-rate policy in particular in response to financial shocks that expose the economy to the effective-lower-bound on the policy rate, and can promote a swifter exit from the liquidity trap. 

- Also available at SSRN. Previously circulated with the title "Unconventional Monetary Policy and Inequality"


Abstract. An economy plagued by a slump and in a liquidity trap has some options to exit the crisis. We discuss helicopter money and other equivalent policies that can reflate the economy and boost consumption. Traditional helicopter money, via the joint cooperation between the treasury and the central bank, depends critically on the central bank fully guaranteeing treasury's debt. We show that the central bank can do helicopter money on its own, without any treasury's involvement.

- Also available as DISSE Working Paper n.8/2020


Abstract. Using a tractable New Keynesian model with heterogeneous agents, we analyse the interplay between households’ heterogeneity and rational bubbles, and their normative implications for monetary policy. Households are infinitely-lived and heterogeneous because of two sources of idiosyncratic uncertainty, which makes them stochastically cycle in and out of segmented asset markets, and in and out of employment. We show that bubbles can emerge in equilibrium despite the fact that households are infinitely lived, because of the structural heterogeneity that affects their activity in asset and labor markets. The elasticity of an endogenous labor supply, the heterogeneity in asset-market participation and the level of long-run monopolistic distortions are shown to affect the size of equilibrium bubbles and their cyclical implications. We also show that a central bank concerned with social welfare faces an additional tradeoff implied by bubbly fluctuations which makes, in general, strict inflation targeting a suboptimal monetary-policy regime.

- Also available at SSRN