Program > Papers by speaker > Ragot Xavier

We derive optimal monetary and fiscal policies in heterogeneous-agent economy with nominal frictions and aggregate shocks. This enables us to investigate the redistributive role of optimal monetary policy. We determine the optimal dynamics of nominal interest rate, capital and labor taxes, and public debt. The role of monetary policy is shown to crucially depend on the fiscal tools that are available. When linear taxes on capital and labor are available, then there is no redistributive role for monetary policy. When fiscal tools are incomplete, we identify three new objectives for monetary policy which generate deviations from price stability, and only due to agents heterogeneity. The first objective is an information channel when time-varying capital taxes are not available. The second one is a real-wage objective : Inflation is used to affect the real wage over the business cycle for redistributive purposes. This real-wage channel generates empirically consistent dynamics of public debt. The third objective is a public finance channel, related to the provision of public debt for liquidity needs. We provide analytical and numerical results thanks to an extensive use of the Lagrangian approach to derive optimal policies. This approach is well-suited for monetary policy with heterogeneous agents.