A Theory of Macroprudential Policies in the Presence of Nominal Rigidities
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This paper was first circulate under the title “On the Inefficiency of Financial Market Equilibria in Macroeconomic Models with Nominal Rigidities”. We thank Adrien Auclert, Markus Brunnermeier, John Geanakoplos, Herakles Polemarchakis for useful comments. We thank seminar and conference participants at Columbia, Cowles-Yale, Turkish Central Bank, and SED-Seoul. Ben Hebert provided outstanding research assistance. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.