Monetary policy in a non-representative agent economy: A survey

Michal Brzoza-Brzezina, Marcin Kolasa, Grzegorz Koloch, Krzysztof Makarski and Michał Rubaszek

No 95, NBP Working Papers from Narodowy Bank Polski

Abstract: It is well-known that central bank policies affect not only macroeconomic aggregates, but also their distribution across economic agents. Similarly, a number of papers demonstrated that heterogeneity of agents may matter for the transmission of monetary policy on macro variables. Despite this, the mainstream monetary economics literature has so far been dominated by dynamic stochastic general equilibrium (DSGE) models with representative agents. This article aims to tilt this imbalance towards heterogeneous agents setups by surveying the main positive and normative findings of this line of the literature, and suggesting areas in which these models could be implemented. In particular, we review studies that analyze the heterogeneity of (i) households’ income, (ii) households’ preferences, (iii) consumers’ age, (iv) expectations, and (v) firms’ productivity and financial position. We highlight the results on issues that, by construction, cannot be investigated in a representative agent framework and discuss important papers modifying the findings from the representative agent literature.

Keywords: Heterogeneous Agents; Monetary Policy (search for similar items in EconPapers)
JEL-codes: E31 E32 E43 E44 E52 (search for similar items in EconPapers)
Pages: 53
Date: 2011
New Economics Papers: this item is included in nep-cba, nep-dge, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Journal Article: MONETARY POLICY IN A NON-REPRESENTATIVE AGENT ECONOMY: A SURVEY (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:nbp:nbpmis:95

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