Abstract : What are the effects of central bank balance sheet expansion, and should we worry about central bank losses? Using a Heterogeneous Agent New Keynesian model incorporating money in utility and an endogenous zero lower bound (ZLB), we study the fiscal-monetary interaction of central bank balance sheet policies. First, permanent balance sheet expansions stimulate the economy in the long-run and, by anticipation, increase inflation and output during the ZLB episode, as they interact with distortionary taxes and imperfect capital markets. Second, at the end of the ZLB, following a balance sheet expansion, the central bank incurs losses, altering the time path of taxes, which is not neutral in our non-Ricardian framework. We explore different scenarios to address these losses and find that emitting CB securities dominates fiscal adjustments from the Treasury. Therefore, we conclude that the overall effect of balance sheet policies during ZLB episodes depends on (i) the expected normalization, and (ii) the fiscal implication of central bank losses.

Abstract : Distributive effects of carbon taxation are key for its political acceptability. We introduce geographical heterogeneity into a calibrated dynamic general equilibrium heterogeneous-agent model, where energy is both a consumption good and an intermediate input. We evaluate the aggregate and distributive effects of carbon taxation and obtain three key results. First, the distributive effects of carbon taxation are driven by geography more than income, with rural households suffering larger welfare losses. Second, taxing households' direct emissions is regressive, while taxing firms' direct emissions is progressive. Third, we simulate various revenue-recycling policies using targeted transfers. We find that it is possible to reduce emissions and mitigate welfare losses associated with the green transition.