A modelinwhichmonetarypolicyisaboutmoney

Optimal monetarypolicyisstudiedinamodelwith(i)heterogeneityinthedegreeto which differentpeoplearemonitored(havepubliclyknownhistories);(ii)idiosyncratic shocks thatgiverisetoheterogeneityinearningandspendingrealizations;and (iii) central-bankinterventionina‘‘market’’inclaimsorcreditinwhichtheparticipants are thosewhoareheavilymonitored.Aspecialcaseofthemodelhaseveryoneperfectly monitored. Inthatcase,thereisnoroleformoneyandnoroleforcentral-bank intervention. Intheexampledisplayedwithimperfectmonitoring,optimalintervention is notsimple