Benmir, Ghassane, Jaccard, Ivan and Vermandel, Gauthier (2023) Optimal monetary policy in an estimated SIR model. European Economic Review, 156. ISSN 0014-2921
Full text not available from this repository.Abstract
This paper studies the design of Ramsey optimal monetary policy in a Health New Keynesian (HeNK) model with Susceptible, Infected and Recovered (SIR) agents. The nonlinear model is estimated with maximum likelihood techniques on Euro Area data. Our objective is to deconstruct the mechanism by which contagion risk affects the conduct of monetary policy. If monetary policy is the only game in town, we find that optimal policy features significant deviations from price stability to mitigate the effect of the pandemic. The best outcome is obtained when the optimal Ramsey policy is combined with a lockdown strategy of medium intensity. In this case, monetary policy can concentrate on its price stabilization objective.
| Item Type: | Article |
|---|---|
| Additional Information: | © 2023 Elsevier B.V. |
| Divisions: | Economics |
| Subjects: | H Social Sciences > HG Finance H Social Sciences > HB Economic Theory |
| Date Deposited: | 04 Jul 2023 11:12 |
| Last Modified: | 25 Apr 2024 19:21 |
| URI: | http://eprints.lse.ac.uk/id/eprint/119628 |
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