Optimal monetary policy and financial stability in a non-Ricardian economy
Sapienza University of Rome
DSGE model with Discontinuous Asset Market Participation (DAMP) where agents stochastically cycle between active and inactive states in asset markets. Active agents face finite planning horizons (perpetual-youth structure) and enter insurance c
intermediate firms: monopolistic competition with Calvo pricing; final firms: perfect competition with CES aggregation
Table 1 p.22
Optimal policy under Discretion in DAMP economy
Authors describe optimal discretionary policy as main result showing price stability is not optimal