Anushka Chawla: anushka.chawla[at]univ-amu.fr
Laura Sénécal: laura.senecal[at]univ-amu.fr
Carolina Ulloa Suarez: carolina.ulloa-suarez[at]univ-amu.fr
In this paper, we evaluate what should be the optimal fiscal response to different monetary policy regimes when inequality and redistribution matter. Due to persistently high indebtedness and unemployment rates as well as increasing inequality, the evolution of income and wealth distribution have become essential to assess the coordination of fiscal and monetary policies. In order to deal with these redistribution issues, we focus on the fiscal response maximising welfare using a HANK model with search and matching frictions calibrated on US data. Using an optimal simple rule (as in Schmitt-Grohe and Uribe (2006)), we determine the optimal response for taxation rates following different types of monetary shock and analyse the consequences on aggregate variables as well as distributions and inequality.