부산대학교 도서관

We study optimal monetary and fiscal policies in a New Keynesian model with heterogeneous agents, incomplete markets, and nominal rigidities. Our approach uses small-noise expansions and Fréchet derivatives to approximate equilibria quickly and efficiently. Responses of optimal policies to aggregate shocks differ qualitatively from what they would be in a corresponding representative agent economy and are an order of magnitude larger. A motive to provide insurance that arises from heterogeneity and incomplete markets outweighs price stabilization motives. Article Note: We thank the referees as well as Adrien Auclert, Benjamin Moll, and participants at numerous seminars and conferences for helpful criticisms. Bhandari, Evans, and Golosov acknowledge that this material is based upon work supported by the NSF under Grant 36354. Any opinions, findings, and conclusions or recommendations expressed in this material are those of the authors and do not necessarily reflect the views of the NSF. CAPTION(S): Online Appendix Data and Programs Byline: Anmol Bhandari, David Evans, Mikhail Golosov, Thomas J. Sargent