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Economics Webinar (2023-03)

Topic: Redistributive Inflation and Optimal Monetary Policy

Speaker: Yucheng Yang, Princeton University

Time: Thursday, January 12, 10:00-11:30 a.m. Beijing time

Location: Zoom Online Conference Room

Abstract

Inflation has heterogeneous impacts on households, which then affects optimal monetary policy design. I study optimal monetary policy rules in a quantitative heterogeneous agent New Keynesian (HANK) model where inflation has redistributive effects on households through their different (1) consumption baskets, (2) nominal wealth positions, and (3) earnings elasticities to business cycles. I parameterize the model based on the empirical analysis of these channels using the most recent data. Unlike in representative agent models, a utilitarian central bank should adopt an asymmetric monetary policy rule that is accommodative towards inflation and aggressive towards deflation. Specifically, by accommodating stronger demand and higher inflation, the central bank benefits low income and low-wealth households through nominal debt devaluation and higher earnings growth.

Biography

Yucheng Yang is a Ph.D. candidate at Princeton University. He got his bachelor’s degree from Peking University and master’s degree from the University of Wisconsin-Madison. His research interests are macroeconomics, machine learning, finance, and data science. His research is presented at major academic conferences and policy institutions such as several US Federal Reserve Banks, the UK Treasury, among others.

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