Must-Read: Amir Sufi: Out of Many, One?: Household Debt, Redistribution and Monetary Policy during the Economic Slump

Must-Read: Amir Sufi: Out of Many, One?: Household Debt, Redistribution and Monetary Policy during the Economic Slump: “Monetary policy has been especially weak in advanced economies over the past 7 years…

…because the redistribution channels of monetary policy have been severely hampered. Standard representative agent-based macroeconomic models miss this key insight, and have therefore been an insufficient guide to policy decisions. A framework that recognizes the importance of redistribution channels of monetary policy can guide central bankers on what policies are most likely to be effective. The same policy may have different effects on the real economy depending on the distribution of debt capacity across individuals.