Type
Working paper
Titre
Optimal Monetary Policy and Liquidity with Heterogeneous Households
Dans
Sciences Po Economics Discussion Papers
Auteur(s)
BILBIIE Florin - Ecole d'Économie de Paris - Paris School of Economics (PSE) (Auteur)
RAGOT Xavier - Observatoire français des conjonctures économiques (Auteur)
Éditeur
Paris : Département d'économie de Sciences Po
Collection
Sciences Po Economics Discussion Papers : 2017-02
Mots clés
Liquidity trap, Zero lower bound, Heterogeneous agents, Optimal policy
Résumé
EN
This paper derives the optimal money injection at the Zero Lower Bound (ZLB), in a tractable model where households hold heterogeneous money holdings due to explicit financial fric- tions, such as limited participation or temporary binding credit constraints. This framework is moti- vated by recent empirical findings. A deleveraging shock generates deflationary pressure and a fall in the real interest rate, pushing the economy to the ZLB. The main result is that open-market opera- tions can stabilize the economy at the ZLB whereas lump-sum money transfers cannot. Moreover, an optimal money injection does not avoid the economy being at the ZLB.

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