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Faculté et Recherche

Inequality and optimal exchange-rate policy

24 nov
2022
14H15 - 15H30
Jouy-en-Josas
Anglais

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2022-11-24T14:15:00 2022-11-24T15:30:00 Inequality and optimal exchange-rate policy Department of Economics and Decision Sciences Speaker : Edouard Challe Room T-024 Jouy-en-Josas

Department d'Economie et Sciences de la Décision 
Intervenant : Edouard Challe
Salle T-024

Abstract:  

We study optimal exchange rate stabilization in a tractable Small Open HANK Economy with endogenous consumption risk and rich cross-sectional inequalities. Besides the closed-economy channels, aggregate demand management operates through the real exchange rate, which affects both GDP (through expenditure switching) and national income (through the relative price of foreign goods) and ultimately feeds back to domestic cross-sectional heterogeneity. We show that these open-economy channels require stabilizing the exchange rate substantially more in HANK than in RANK after aggregate productivity shocks; this is because stabilizing the exchange rate mitigates expenditure switching and the implied fluctuations in domestic inequalities. The same is true in response to capital-flow shocks, provided that agents are sufficiently risk-averse.

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Ajouter au calendrier
2022-11-24T14:15:00 2022-11-24T15:30:00 Inequality and optimal exchange-rate policy Department of Economics and Decision Sciences Speaker : Edouard Challe Room T-024 Jouy-en-Josas