Savings, asset scarcity, and monetary policy

• 成果类型: Article
• 署名作者: Altermatt, Lukas
• 署名单位: University of Wisconsin System; University of Wisconsin Madison; University of Basel
• 刊物名称: JOURNAL OF ECONOMIC THEORY
• ISSN/ISSBN: 0022-0531
• DOI: 10.1016/j.jet.2019.04.004
• 发表日期: 2019
• 页码: 329-359
• 关键词: New monetarism; overlapping generations; zero lower bound; Optimal stabilization

摘要

This paper analyzes optimal monetary policy regarding asset markets in a model where money and savings are essential and asset markets matter. The model is able to explain why different regimes for the correlation of real interest rates and stock price-dividend ratios exist, and offers two explanations why the correlation vanished after 2007: A decrease in inflation or changes in the supply of risky and safe assets. The results on optimal policy show that away from the Friedman rule, fiscal policy can improve welfare by increasing the amount of outstanding government debt. If the fiscal authority is not willing or able to increase debt, the monetary authority can improve welfare of current generations by reacting procyclically to asset return shocks. (C) 2019 Elsevier Inc. All rights reserved.