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Author:Benigno, Pierpaolo 

Working Paper
Optimal monetary and fiscal policy: a linear-quadratic approach

We propose an integrated treatment of the problems of optimal monetary and fiscal policy, for an economy in which prices are sticky (so that the supply-side effects of tax changes are more complex than in standard fiscal analyses) and the only available sources of government revenue are distorting taxes (so that the fiscal consequences of monetary policy must be considered alongside the usual stabilization objectives). Our linear-quadratic approach allows us to nest both conventional analyses of optimal monetary stabilization policy and analyses of optimal tax-smoothing as special cases of ...
International Finance Discussion Papers , Paper 806

Working Paper
Overconfidence, Subjective Perception, and Pricing Behavior

We study the implications of overconfidence for price setting in a monopolistic competition setup with incomplete information. Our price-setters overestimate their abilities to infer aggregate shocks from private signals. The fraction of uninformed firms is endogenous; firms can obtain information by paying a fixed cost. We find two results: (1) overconfident firms are less inclined to acquire information, and (2) prices might exhibit excess volatility driven by nonfundamental noise. We explore the empirical predictions of our model for idiosyncratic price volatility.
FRB Atlanta Working Paper , Paper 2017-14

Working Paper
Inflation persistence and optimal monetary policy in the euro area

In this paper we first present supporting evidence of the existence of heterogeneity in inflation dynamics across euro area countries. Based on the estimation of New Phillips Curves for five major countries of the euro area, we find that there is significant inertial (backward looking) behavior in inflation in four of them, while inflation in Germany has a dominant forward looking component. In the second part of the paper we present an optimizing agent model for the euro area emphasizing the heterogeneity in inflation persistence across regions. Allowing for such a backward looking component ...
International Finance Discussion Papers , Paper 749

Conference Paper
Price stability with imperfect financial integration

Proceedings

Conference Paper
Optimal stabilization policy when wages and prices are sticky: the case of a distorted steady state

Proceedings

Conference Paper
Optimal monetary and fiscal policy: a linear-quadratic approach

Proceedings

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