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Working Paper
Optimal Monetary Policy for the Masses
We study nominal GDP targeting as optimal monetary policy in a simple and stylized model with a credit market friction. The macroeconomy we study has considerable income inequality, which gives rise to a large private sector credit market. There is an important credit market friction because households participating in the credit market use non-state contingent nominal contracts (NSCNC). We extend previous results in this model by allowing for substantial intra-cohort heterogeneity. The heterogeneity is substantial enough that we can approach measured Gini coefficients for income, financial ...
Working Paper
Tax Progressivity, Economic Booms, and Trickle-Up Economics
We propose a method to decompose changes in the tax structure into a component measuring the level of taxes and a component orthogonal to the level that measures progressivity. While our focus is on the progessivity results, we find that the level shock is similar to standard tax shocks found in the empirical literature in that a rise in the level is contractionary. An increase in tax progressivity sets off an economic boom. Those at the bottom of the income distribution (who are constrained hand-to-mouth consumers) set off a consumption boom that expands the overall economy. Those at the top ...
Working Paper
Tax Progressivity, Economic Booms, and Trickle-Up Economics
We propose a method to decompose changes in the tax structure into orthogonal components measuring the level and progressivity of taxes. While our focus is on the progessivity results, we find that the level shock is similar to standard tax shocks found in the empirical literature in that a rise in the level is contractionary. We find that an increase in tax progressivity sets off an economic boom. When tax progressivity increases, those at the bottom of the income distribution experience an increase in disposable income; these consumers have a high marginal propensity to consume, and this ...
Working Paper
Tax Progressivity, Economic Booms, and Trickle-Up Economics
We propose a method to decompose changes in the tax structure into orthogonal components measuring the level and progressivity of taxes. The level shock is similar to tax shocks found in the empirical literature--increasing the tax level is contractionary. On the other hand, an increase in tax progressivity is expansionary. When tax progressivity increases, the bottom of the income distribution experiences an increase in disposable income. Agents at the low end of the income distribution who have high marginal propensity to consume offset the decrease in consumption by the savers at the high ...
Working Paper
Optimal Monetary Policy for the Masses
We study nominal GDP targeting as optimal monetary policy in a simple and stylized model with a credit market friction. The macroeconomy we studyhas considerable income inequality, which gives rise to a large private sector credit market. There is an important credit market friction because households participating in the credit market use non-state contingent nominal contracts (NSCNC). We extend previous results in this model by allowing for substantial intra-cohort heterogeneity. The heterogeneity is substantial enough that we can approach measured Gini coefficients for income, financial ...
Working Paper
Optimal Monetary Policy for the Masses
We study nominal GDP targeting as optimal monetary policy in a simple and stylized model with a credit market friction. The macroeconomy we study has considerable income inequality, which gives rise to a large private sector credit market. There is an important credit market friction because households participating in the credit market use non-state contingent nominal contracts (NSCNC). We extend previous results in this model by allowing for substantial intra-cohort heterogeneity. The heterogeneity is substantial enough that we can approach measured Gini coefficients for income, financial ...