Article

Optimal Fiscal and Monetary Policy in Customer Markets

David Arseneau, Ryan Chahrour, Sanjay Chugh et Alan Shapiro

Résumé

This paper presents a model in which some goods trade in \customer markets." In these markets, advertising plays a critical role in facilitating long-lived relationships. We estimate both policy and non-policy parameters of the model (which includes New-Keynesian frictions) on U.S. data, including advertising expenditures. The estimated parameters imply a large congestion externality in the pricing of customer market goods. This pricing inefficiency motivates the analysis of optimal policy. When the planner has access to a complete set of taxes and chooses them optimally, fiscal policy eliminates the externalities with large adjustments in the tax rates that operate directly in customer markets; labor tax volatility remains low. If available policy instruments are constrained to the interest rate and labor tax, then the latter displays large and procyclical uctuations, while the implications for monetary policy are largely unchanged from the model with no customer markets.

Codes JEL

  • E30: General
  • E50: General
  • E61: Policy Objectives • Policy Designs and Consistency • Policy Coordination
  • E63: Comparative or Joint Analysis of Fiscal and Monetary Policy • Stabilization • Treasury Policy

Référence

David Arseneau, Ryan Chahrour, Sanjay Chugh et Alan Shapiro, « Optimal Fiscal and Monetary Policy in Customer Markets », Journal of Money, Credit and Banking, vol. 47, n° 4, juin 2015, p. 617–672.

Voir aussi

Publié dans

Journal of Money, Credit and Banking, vol. 47, n° 4, juin 2015, p. 617–672