We compare welfare and macroeconomic effects of monetary policy and macroprudential policy, in particular targeting loan-to-value (LTV) ratios. We develop a DSGE model with collateral constraints and two types of agents. In this setup, we study seven potential policy rules responding to credit growth and fluctuations in prices of collateral. We show that monetary policy responding to deviations of collateral prices from their steady state value results in the highest level of social welfare. It is also useful in stabilizing output and inflation. Macroprudential policy using LTV ratio as the instrument is dominated in terms of output and inflation stability by the interest rate rules. If interest rate rules are not available, the LTV ratio can be used to improve welfare, but gains are small.
Piotr received his PhD in Economics from the University of Chicago in 2020 and joined GRAPE to work on inequality. His main research interests are macroeconomics and monetary economics, in particular macroeconomics with heterogeneous agents, sovereign default and macroeconomic theory.
Personal website: pzoch.com
Opublikowane | Published
Macroprudential and monetary policy rules in a model with collateral constraints | Gospodarka Narodowa Przeczytaj streszczenie | Read abstract
W toku | Work in progress
Markups, labor market inequality and the nature of work Przeczytaj streszczenie | Read abstract
We demonstrate the importance of distinguishing between the traditional use of labor for production, versus alternative uses of labor for overhead, marketing and other expansionary activities, for studying the distribution of both factor income and labor income. We use our framework to assess the impact of changes in markups on the overall labor share and on labor income inequality across occupations. We identify the production and expansionary content of different occupations from the co-movement of occupational income shares with markup-induced changes in the labor share. We find that around one-fifth of US labor income compensates expansionary activities, and that occupations with larger expansionary content have experienced the fastest wage and employment growth since 1980. Our framework can rationalize a counter-cyclical labor share in the presence of sticky prices and can be used to study the distributional effects of demand shocks, monetary policy and secular changes in competition.