Authors:

  • Emmanuel Farhi

Excerpt

A Theory of Macroprudential Policies in the Presence of Nominal Rigidities. Emmanuel Farhi, May 2015, Paper. "We propose a theory of monetary policy and macroprudential interventions in financial markets. We focus on economies with nominal rigidities in goods and labor markets and subject to constraints on monetary policy, such as the zero lower bound or fixed exchange rates. We identify an aggregate demand externality that can be corrected by macroprudential interventions in financial markets. Ex post, the distribution of wealth across agents affects aggregate demand and output..." Link