We study how trade openness and the trade balance shape the sensitivity of aggregate consumption in small open economies with heterogeneous households. In a two-agent small-open-economy New Keynesian model with asymmetric import and export openness, …
This paper studies how household heterogeneity affects the level and cyclical behavior of the optimal carbon tax in a real economy. We demonstrate that an equity-efficiency trade-off arises due to income inequality and heterogeneity in the marginal …
We study the implications of a ‘dual mandate’ of price and output stability in a heterogeneous agent New Keynesian economy where fiscal policy is set in nominal terms. Specifically, the government controls the quantity of nominal debt, enabling price …