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Optimal Monetary policy with Informality: A Benchmark Framework

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dc.contributor.eventThe Economics of Informality Conference 2018spa
dc.creatorGómez, Mónica A.
dc.creatorHairault, Jean-Olivier
dc.date.accessioned2018-08-03T15:55:58Z
dc.date.available2018-08-03T15:55:58Z
dc.date.created2018-05-28
dc.date.issued2018
dc.description.abstractOur paper aims at unveiling how much the monetary policy shall deviate from the zero-inflation allocation in an economy with a large informal sector. A first insight is thatinformality amplifies cost-push shocks on inflation. The gap between the natural rateand the first best allocation varies due to both fluctuations in tax distortion and sectoralmisallocation. In both channels, the size of informality is key for the magnitude of thecost-push shock, and with it the cost of business cycles. It happens that the higher thelevel of informality, the larger the business cycle costs are. A second insight is relatedto how the monetary policy should optimally spread these costs in terms of inflationand output gap volatility, and how it depends on the informality size. It is shown thatthe aggregate sacrifice ratio (in terms of a weighted average of the sectoral output gaps)increases with the size of the informal sector. This leads to recommend less inflationstability in an economy with a large informal sector. The last insight is that monetarypolicy should not target one particular sector as there is a sectoral integration condition.Only considerations related to informational issues could lead to recommend to favor theformal output gap in the monetary ruleeng
dc.format.mimetypeapplication/pdf
dc.identifier.doihttps://doi.org/10.48713/10336_18255
dc.identifier.urihttp://repository.urosario.edu.co/handle/10336/18255
dc.language.isoeng
dc.publisher.otherUniversidad del Rosario. Facultad de Economíaspa
dc.rightsAtribución-NoComercial-CompartirIgual 2.5 Colombiaspa
dc.rights.accesRightsinfo:eu-repo/semantics/openAccess
dc.rights.accesoAbierto (Texto Completo)spa
dc.rights.urihttp://creativecommons.org/licenses/by-nc-sa/2.5/co/
dc.source.instnameinstname:Universidad del Rosariospa
dc.source.reponamereponame:Repositorio Institucional EdocURspa
dc.subjectInformalidadspa
dc.subjectPolítica monetaria óptimaspa
dc.subjectMacroeconomía neokeynesianaspa
dc.subjectDistorsión fiscalspa
dc.subject.ddcProducción
dc.subject.keywordInformalityeng
dc.subject.keywordOptimal monetary policyeng
dc.subject.keywordNew-Keynesian macroeconomicseng
dc.subject.keywordTax distortioneng
dc.subject.lembEconomía informalspa
dc.subject.lembPolítica monetariaspa
dc.subject.lembMacroeconomíaspa
dc.titleOptimal Monetary policy with Informality: A Benchmark Frameworkspa
dc.typeconferenceObjecteng
dc.type.hasVersioninfo:eu-repo/semantics/publishedVersion
dc.type.spaDocumento de conferenciaspa
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The Economics of Informality Conference 2018