This paper investigates the implications of heterogeneous price rigidities across sectors for the distributional and aggregate effects of monetary policy. First, we identify and characterize analytically a new set of earnings and expenditure channels of monetary policy that emerge in the...

We model the optimal resolution of insolvent firms in general equilibrium. Absent externalities, the optimal corporate-insolvency system encourages lending by letting banks assign liquidations ex-post. We show that a social planner optimally intervenes in such a system during a crisis because of...

Should central banks’ inflation targets remain set in stone? We study a dynamic mechanism design problem between a government (principal) and a central bank (agent). The central bank has persistent private information about structural shocks. Firms learn the state from the central bank’s...

We study the scope for international cooperation in macroprudential policies. Multinational banks contribute to and are affected by fire sales in countries they operate in. National governments setting quantity regulations non-cooperatively fail to achieve the globally efficient outcome,...

We provide a framework to study bail-in regimes for banks. In the presence of a monitoring problem, the optimal bank capital structure combines standard debt, which liquidates the bank and provides strong monitoring incentives, and bail-in debt, which recapitalizes the bank but provides weaker...

We calculate the socially optimal level of illiquidity in an economy populated by households with taste shocks and present bias (Amador, Werning, and Angeletos 2006). The government chooses mandatory contributions to respective spending/savings accounts, each with a different pre-retirement...

We calculate the socially optimal level of illiquidity in an economy populated by households with taste shocks and present bias (Amador, Werning, and Angeletos 2006). The government chooses mandatory contributions to respective spending/savings accounts, each with a different pre-retirement...