Monetary policy with heterogeneous beliefs
Abstract/Contents
- Abstract
- This paper studies the impact of monetary policy with heterogeneous beliefs in a micro-founded New Keynesian model (as developed in Kurz(2012) and Kurz, Piccillo and Wu(2013)) when there are demand shocks in the economy. The main question asked in this paper is the effect of agents' heterogeneity on monetary policy. How would heterogeneity of beliefs affect the dynamics of the economy, and most importantly, the policy rules to be adopted to maximize individual welfare on average? This paper explores the unique characteristics of belief heterogeneity by looking at the volatilities and impulse response functions derived from the model. Stabilization of the economy is no longer only evaluated by the objective of the stabilization of macro variables, it is also important to minimize fluctuations in individual consumption. The traditional policy efficient frontier changes when agents' heterogeneity is introduced and the impact of monetary policy is divided into two major regions. Policy rules interact with the dynamics of beliefs differently in each region, and therefore reach different stabilization results. I study the causes of the two policy regions and discuss how policy rules should be implemented. In this paper, I demonstrate how to generalize the system to incorporate different monetary policies into the economy. I also perform accuracy tests by computing the errors in euler equations to evaluate various assumptions of the model.
Description
| Type of resource | text |
|---|---|
| Form | electronic; electronic resource; remote |
| Extent | 1 online resource. |
| Publication date | 2014 |
| Issuance | monographic |
| Language | English |
Creators/Contributors
| Associated with | Wu, Howei |
|---|---|
| Associated with | Stanford University, Department of Economics. |
| Primary advisor | Kurz, Mordecai |
| Thesis advisor | Kurz, Mordecai |
| Thesis advisor | Judd, Kenneth L |
| Thesis advisor | Taylor, John B |
| Advisor | Judd, Kenneth L |
| Advisor | Taylor, John B |
Subjects
| Genre | Theses |
|---|
Bibliographic information
| Statement of responsibility | Howei Wu. |
|---|---|
| Note | Submitted to the Department of Economics. |
| Thesis | Thesis (Ph.D.)--Stanford University, 2014. |
| Location | electronic resource |
Access conditions
- Copyright
- © 2014 by Howei Wu
- License
- This work is licensed under a Creative Commons Attribution Non Commercial 3.0 Unported license (CC BY-NC).
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