We study whether the source of uncertainty shocks matters for optimal monetary policy, focusing on productivity and cost-push uncertainty shocks. Although both shocks deliver similar macroeconomic dynamics under an empirical Taylor rule, they generate very different dynamics under optimal...

We measure the extent of inefficient fluctuations in the relative price of investment in the US using an estimated two-sector New Keynesian model. In the presence of these fluctuations, inefficiencies in the economy are summarized by the variation in the following policy objects: the relative...

This study investigates the welfare effects of business cycle fluctuations from distributional perspectives. To this end, we develop a quantitative heterogeneous-agent model which incorporates market incompleteness and non-convexity into the mapping from the time devoted to work to labor...