Helicopter Ben, Monetarism, The New Keynesian Credit View and Loanable Funds

AbstractThis paper studies how macroprudential policy tools applied to the housing market can complement the interest rate-based monetary policy in achieving one additional stabilization objective, defined as keeping either economic activity or credit at some exogenous (and possibly time-varying) levels. We show analytically in a canonical New Keynesian model with housing and collateral constraints that using the loan-to-value (LTV) ratio, tax on credit or tax on property as additional policy instruments does not resolve the inflation-output volatility tradeoff. Perfect targeting of inflation and credit with monetary and macroprudential policy is possible only if the role of housing debt in the economy is sufficiently small. The identified limits to the considered policies are related to their predominantly intertemporal impact on decisions made by financially constrained agents, making them poor complements to monetary policy, which also operates at an intertemporal margin. These limits can be overcome if macroprudential policy is instead designed such that it sufficiently redistributes income between savers and borrowers.

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Information Use and the Condorcet Jury Theorem

Mathematics ◽

10.3390/math9101098 ◽

2021 ◽

Vol 9 (10) ◽

pp. 1098

Author(s):

Keiichi Morimoto

Keyword(s):

Monetary Policy ◽

Voting Behavior ◽

Imperfect Information ◽

Information Use ◽

Information Aggregation ◽

New Keynesian ◽

Strategic Complementarity ◽

Keynesian Model ◽

Jury Theorem

Using a simple model of a coordination game, this paper explores how the information use of individuals affects an optimal committee size. Although enlarging the committee promotes information aggregation, it also stimulates the members’ coordination motive and distorts their voting behavior through higher-order beliefs. On the determination of a finite optimal committee size, the direction and degree of strategic interactions matter. When the strategic complementarity among members is strong, a finite optimal committee size exists. In contrast, it does not exist under strategic substitution. This mechanism is applied to the design of monetary policy committees in a New Keynesian model in which a committee conducts monetary policy under imperfect information.

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