Monetary policy and social welfare
Benchimol and Fourçans ask whether minimizing a central bank loss is equivalent to maximizing households’ welfare. They find that NGDP level targeting rules are superior in regards to central bank losses while a Taylor type rule is best when household welfare is taken in consideration. Should therefore Central Banks follow several policy rules?
Monetary Rule, Central Bank Loss and Household’s Welfare: an Empirical Investigation
Authors: Jonathan Benchimol, André Fourçans
From: Bank of Israel – ESSEC Business School
Implications of underdiversified household portfolios
Our results indicate that the impact on household and social welfare of financial policy, through education, innovation, and regulation, can be substantial – the potential gains are equivalent to an increase in the return on aggregate wealth of around 6{5e7f07e14add20b2e04f4edb85a447d3cd8121fc27b809645e9fed603c22cc5c}. Most of this gain arises from a multiplier effect applied to the gains for a mean-variance investor, which driven by the effects of improved portfolio diversification on intertemporal consumption smoothing and aggregate growth.
Does Household Finance Matter? Small Financial Errors with Large Social Costs
Authors: Harjoat Singh Bhamra, Raman Uppal
From: Imperial College – EDHEC Business School
Low interest rates and household consumption
Are extended periods of low interest rates necessarily associated with a massive drop in aggregate consumption? No, argues Mabille because in a Bewley-Huggett economy, where heterogeneous households are faced with debt limits, when the economy transits from a period of easy credit to a period of tight credit households first deleverage and then start building their precautionary savings. As a result, during extended periods of low interest rates households hold more assets than debt, smoothing their consumption.
Household Credit Uncertainty and the Real Interest Rate
Author: Pierre Mabille
From: New York University
