A Behavioral Heterogeneous Agent New Keynesian Model

Oliver Pfäuti and Fabian Seyrich ()

CRC TR 224 Discussion Paper Series from University of Bonn and University of Mannheim, Germany

Abstract: We propose a behavioral heterogeneous agent New Keynesian model in which monetary policy is amplified through indirect general equilibrium effects, fiscal multipliers can be larger than one and which delivers empirically-realistic intertemporal marginal propensities to consume. Simultaneously, the model resolves the forward guidance puzzle, remains stable at the effective lower bound and determinate under an interest-rate peg. The model is analytically tractable and nests a wide range of existing models as special cases, none of which can produce all the listed features within one model. We extend our model and derive an equivalence result of models featuring bounded rationality and models featuring incomplete information and learning. This extended model generates hump-shaped responses of aggregate variables and a novel behavioral amplification channel that is absent in existing HANK models.

Keywords: Behavioral Macroeconomics; Heterogeneous Households; Monetary Policy; Forward Guidance; Fiscal Policy; New Keynesian Puzzles; Determinacy; Lower Bound (search for similar items in EconPapers)
JEL-codes: E21 E52 E62 E71 (search for similar items in EconPapers)
Pages: 49
Date: 2022-02
New Economics Papers: this item is included in nep-cba, nep-dge, nep-his, nep-mac and nep-upt
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Citations: View citations in EconPapers (10)

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Working Paper: A Behavioral Heterogeneous Agent New Keynesian Model (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:bon:boncrc:crctr224_2022_334

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