Corpus ID: 224085909

State Dependent Monetary Policy, Working Paper 13-17

  title={State Dependent Monetary Policy, Working Paper 13-17},
  author={F. Lippi and S. Ragni and N. Trachter},
We study the optimal anticipated monetary policy in a flexible-price economy featuring heterogenous agents and incomplete markets, which give rise to a business cycle. In this setting money policy has distributional effects that depend on the state of the cycle. We parsimoniously characterize the dynamics of the economy and study the optimal regulation of the money supply as a function of the state. The optimal policy prescribes monetary expansions in recessions, when insurance is most needed… Expand
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