Heterogeneous Consumers, Demand Regimes, Monetary Policy and Equilibrium Determinacy

Di Bartolomeo, Giovanni and Rossi, Lorenza (2005): Heterogeneous Consumers, Demand Regimes, Monetary Policy and Equilibrium Determinacy. Forthcoming in: Rivista di Politica Economica (2007): pp. 1-27.

Abstract

This paper investigates the effects of monetary policy in presence of heterogeneous consumers. We study the effectiveness (quantitative effects) of monetary policy and equilibrium determinacy properties of a New Keynesian DSGE model where a fraction of households cannot smooth consumption. We show that two-demand regimes can emerge (according to the “slope” of IS curve) and that the main unconventional results, stressed by recent literature, only hold in the unconventional case of an IS curve positively sloped.

• Item Type: MPRA Paper
• Institution: Istituto di Economia e Finanza - Università Cattolica del Sacro Cuore
• Language: English
• Keywords: Heterogeneous consumers; liquidity constraints; determinacy; demand regimes
• Subjects: E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook > E61 - Policy Objectives ; Policy Designs and Consistency ; Policy Coordination; E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook > E63 - Comparative or Joint Analysis of Fiscal and Monetary Policy ; Stabilization ; Treasury Policy

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