This paper introduces cash transfers targeting the poor in an incomplete markets model with heterogeneous agents facing idiosyncratic risk. These transfers change the degree of insurance in the economy and a ect precautionary motives asymmetrically, leading the poorest households to decrease...

When policy rules are changed, the effect of nominal rigidities should be modelled through endogenous pricing rules. We endogenize Taylor (1979) type pricing rule to examine the output effects of monetary disinflations. We derive optimal fixed-price time-dependent rules in inflationary steady...