Working Papers (Available Upon Request)

“Optimal Monetary and Fiscal Policy under ZLB constraint” (job paper)

I study optimal monetary and government spending policy (with occassionally binding ZLB constraint). With the MIU framework and endogenous government spending, the optimal policy packaged can be derived analytically as two Taylor-type rules. I embed the non-negligible real balance effect by assuming that private consumption and money in the utility function are non-separable. During the ZLB episode, the effect of government is not purely due to the binding ZLB constraint, there is an automatic part that is related to the value of nominal interest rate as well as the real balance effect. When the real balance effect is muted (the additively separable case), this automatic part is a constant.

"Determinacy, Policy Inertia, and Incomplete Market"

I implement the Tractable-HANK model which provides analytical results on how determinacy is influenced by heterogeneity. There is a trade-off between how incomplete market influences determinacy through the Taylor Principle and policy inertia. The positive effects of incomplete market In summary, the contemporaneous data Taylor rules can achieve determinacy once the Taylor Principle is satisfied, while the lagged data and forward data rules have additional requirements on the policy coefficients.

“Conservatism or Activism? Government Spending Policy under Tractable-HANK Model”

​

A discretionary policy maker faces a time inconsistence problem of keep implementing aggressively enough government spending policy during the ZLB episode. I implement the T-HANK model to study how the policy maker's optimal attitude towards fiscal policy is changed with the degree of heterogeneity. The results show that policy maker tend to be more fiscally active when the degree of uncertainty rises.

​