Unemployment risk, liquidity traps, and monetary policy
Sapienza University of Rome; University of Southampton
Heterogeneous Agents New Keynesian (HANK) model with nominal price rigidities (Rotemberg), labor search-and-matching frictions, imperfect unemployment insurance, occasionally binding zero lower bound constraint, and bounded rationality (cogniti
intermediate firms: hire workers in frictional labor market; wholesale firms: monopolistic competition with Rotemberg price adjustment costs; final firms: perfect competition with CES aggregation
Constrained-efficient steady state with zero inflation target under optimal Ramsey policy
Authors derive constrained-efficient steady state with π=0 as optimal inflation target in Section 3.13, Eq. 69