Front Matter Page
Strategy, Policy and Review Department
Contents
1 Introduction
2 A Stylized Model with Steady-state and Transitional Inequality
2.1 A Ricardian Agent, r
2.2 A Keynesian Agent, k
2.3 Labor Supply
2.4 Markets for Goods
2.5 Market Clearing
2.6 Fiscal Policy
2.7 Natural Output
2.8 Equilibrium
2.9 Approximate (Linearized) Equilibrium
2.10 Steady State
2.11 Exogenous Process
2.12 Calibration
3 Optimal Monetary Policy
3.1 The Social Welfare Function
3.2 Optimal Policy
3.3 RANK-Optimal Policy – A Policy For the Average Agent
3.4 Responses to TFP shocks
4 Augmented Taylor rules
4.1 Standard Taylor Rules and Inequality
4.2 Consumption inequality targeting
5 Conclusion
A.1 Deriving the Loss Function
A.2 The Central Bank’s Maximization Problem
A.3 Details in Deriving RANK-Optimal Monetary Policy
A.4 Wage Rigidity
Figures
Figure 1: Welfare Weights and Redistribution Parameter Ï„
Figure 2: Impulse Response to a Positive TFP shock: Optimal vs RANK-Optimal Policy
Figure 3: Welfare of Optimal vs. RANK-Optimal Policy in Consumption Equivalent Terms
Figure 4: Welfare Under An Augmented Taylor Rule
Figure 5: Impulse Response Functions: Standard and Augmented Taylor rules
Tables
Table 1: Calibration
Table 2: Welfare in Taylor Rules – Standard Parametrization
Appendixes
A Details in Deriving Optimal and RANK-Optimal Policies