02 novembre 2022

DEMS Economics Seminar: Riccardo Masolo (Bank of England and Centre for Macroeconomics)

Wednesday, Nov 2nd, at 12pm, DEMS Seminar Room 2104, Building U7

Asset Heterogeneity and the Equitable Rate of Interest

The DEMS Economics Seminar series is proud to host  

Riccardo Masolo

 (Bank of England and Centre for Macroeconomics)


Abstract: The equitable rate of interest minimizes the welfare losses associated to cross-sectional heterogeneity under flexible prices, in a heterogeneous-agent model. If asset holdings are inelastic, it can be characterized as the payoff of a suitably chosen portfolio, under mild conditions. In a Two-Agent model, in which heterogeneity stems from limited asset participation and nominal deposits, the equitable rate is the return on deposits that equalizes the consumption of borrowers and savers, given the level of dividends. Tracking it is generally suboptimal, but the gap between the real rate and the equitable rate provides a summary of the underlying consumption heterogeneity, in much the same way as the natural rate gap is the reference for aggregate stabilization. The stance of monetary policy can be effectively summarized by these two gaps.  
The seminar will be in person: DEMS Seminar room 2104Building U7