01923cas a2200241 a 4500 AALejournalIMF005895 230101c9999 xx r poo 0 0eng d 5.00 USD 9781451872842 1018-5941 BD-DhAAL BD-DhAAL Stehn, Sven Jari. Optimal Monetary and Fiscal Policy with Limited Asset Market Participation / Sven Jari Stehn. Washington, D.C. : International Monetary Fund, 2009. 1 online resource (34 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students This paper characterises the jointly optimal monetary and fiscal stabilisation policy in a new Keynesian model that allows for consumers who lacking access to asset markets consume their disposable income each period. With full asset market participation, the optimal policy relies entirely on the interest rate to stabilise cost-push shocks and government expenditure is not changed. When asset market participation is limited, there is a case for fiscal stabilisation policy. Active use of public spending raises aggregate welfare because it enables a more balanced distribution of the stabilisation burden across asset-holding and non-asset-holding consumers. The optimal response of government expenditure is sensitive to the financing scheme and whether the policymaker has access to a targeted transfer that can directly redistribute resources between consumers. Mode of access: Internet IMF Working Papers; Working Paper ; No. 2009/137 Full text available on IMF http://elibrary.imf.org/view/journals/001/2009/137/001.2009.issue-137-en.xml IMF e-Library