In models with heterogeneous agents, issues of distribution and redistribution jump to the fore, raising the question: Which policies - monetary or fiscal - work most effectively in transferring income between groups? From Townsend's turnpike model, two basic results emerge to help answer this...

This paper uses a New Keynesian model with banks and deposits to study the macroeconomic effects of policies that pay interest on reserves. While their effects on output and inflation are small, these policies require major adjustments in the way that the monetary authority manages the supply of...