During an academic talk Monday at the Bank of Korea, Federal Reserve Bank of St. Louis President James Bullard discussed optimal monetary policy in an environment where credit markets are incomplete. He examined optimal policy both in ordinary times and in times when the zero lower bound (ZLB) on short-term nominal interest rates is encountered. His presentation, “Incomplete Credit Markets and Monetary Policy with Heterogeneous Labor Supply,” is based on a paper in progress with Aarti Singh of the University of Sydney. With the addition of heterogeneous labor supply to their model, the authors explore the question of ... (full story)