Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/95280
Authors: 
Ascari, Guido
Colciago, Andrea
Rossi, Lorenza
Year of Publication: 
2010
Series/Report no.: 
Quaderni di Dipartimento 124
Abstract: 
We study the design of monetary policy in an economy characterized by staggered wage and price contracts together with limited asset market participation (LAMP). Contrary to previous results, we find that once nominal wage stickiness, an incontrovertible empirical fact, is considered: i) the Taylor Principle is restored as a necessary condition for equilibrium determinacy for any empirically plausible degree of LAMP; ii) the effect of LAMP for the design of optimal monetary policy are minor; iii) optimal interest rate rules become active no matter the degree of asset market participation. For this reasons we argue that LAMP does not matter much for monetary policy.
Subjects: 
optimal monetary policy
sticky wages
non-Ricardian household
determinacy
optimal simple rules
JEL: 
E50
E52
Document Type: 
Working Paper

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