摘要 :
We analyze optimal monetary policy in a small open economy characterized by home bias in consumption. Peculiar to our framework is the application of a Ramsey-type analysis to a model of the recent open-economy New Keynesian liter...
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We analyze optimal monetary policy in a small open economy characterized by home bias in consumption. Peculiar to our framework is the application of a Ramsey-type analysis to a model of the recent open-economy New Keynesian literature. We show that home bias in consumption is a sufficient condition for inducing the monetary policymaker of an open economy to deviate from a strategy of strict markup stabilization and contemplate some (optimal) degree of exchange rate stabilization. We focus on the optimal setting of policy both in the case of firms setting prices one period in advance and in a gradual fashion subject to adjustment costs. While the first setup allows us to analytically highlight home bias as an independent source of equilibrium markup variability, the second setup allows to study the effects of future expectations on the optimal policy problem and the effect of home bias on optimal inflation volatility. The latter, in particular, is shown to be related to the degree of trade openness in a U-shaped fashion, whereas exchange rate volatility is monotonically decreasing in openness.
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摘要 :
In a Ramsey policy regime, heterogeneity in beliefs about the potential costs of climate change is shown to produce policy ambiguities that alter carbon prices and taxation. Three sources of ambiguity are considered: (i) the priva...
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In a Ramsey policy regime, heterogeneity in beliefs about the potential costs of climate change is shown to produce policy ambiguities that alter carbon prices and taxation. Three sources of ambiguity are considered: (i) the private sector is skeptical, with beliefs that are unknown to the government, (ii) private agents have pessimistic doubts about the model, or (iii) the policy authority itself does not trust the extant scientific climate model and fears the worst. These three sources of ambiguity give rise to four potential belief regimes characterized by differentials between the government’s and the private sector’s inter-temporal rates of substitutions, with implications for the prices of carbon and capital, framed in terms of distorted Arrow–Debreu pricing theory that establishes an equivalence between the optimal carbon tax and the permit price of an underlying asset—the government-imposed limit on emissions in economies with cap and trade. This paper shows that in most instances, skeptical beliefs and resulting ambiguities justify higher carbon taxes and lower capital taxes to offset the private sector’s increased myopia compared with rational expectations. Conversely, ambiguities created by worst-case fears in either the private sector or in government tend produce forces in the opposite direction.
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