https://macropaperwarehouse.com/authors/anastasiia-antonova/Anastasiia AntonovaHugo -- gohugo.ioen-ushttps://macropaperwarehouse.com/papers/distorted-prices-and-targeted-taxes-in-the-new-keynesian-network-model/https://macropaperwarehouse.com/papers/distorted-prices-and-targeted-taxes-in-the-new-keynesian-network-model/<p>This paper asks how governments should optimally adjust sector-specific taxes in response to sectoral shocks when monetary policy cannot be tailored to individual sectors. The authors work within a variant of Rubbo&rsquo;s (2023) New Keynesian Network (NKN) model, augmented to include time-varying sectoral sales taxes and production subsidies. The model features N sectors connected through input-output linkages, with Calvo-type price rigidity that is heterogeneous across sectors, and encompasses both sectoral productivity (supply) shocks and demand shocks.</p>