Optimal Monetary Policy with Informational Frictions
---- Acknowledgements -----
This paper extends, and subsumes, a 2008 working paper that circulated under the title "Dispersed Information over the Business Cycle: Optimal Fiscal and Monetary Policy." We benefited from comments by various colleagues and seminar participants at MIT, Chicago, Harvard, Indiana, John Hopkins, Ohio State, UC Irvine, UCLA, Universidad Carlos III, Wharton, the Federal Reserve Banks of Minneapolis and Philadelphia, the Bank of Spain, the 2008 Hydra Workshop on Dynamic Macroeconomics, the 2008 NBER Monetary Economics Meeting in Boston, and the 2011 SED Meeting in Ghent. We finally owe special thanks to Robert King and Philippe Bacchetta for discussing earlier versions of our paper. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.