Shocks, Frictions, and Inequality in US Business Cycles

Christian Bayer, Benjamin Born and Ralph Luetticke

American Economic Review, 2024, vol. 114, issue 5, 1211-47

Abstract: We show how a heterogeneous agent New Keynesian (HANK) model with incomplete markets and portfolio choice can be estimated in state space using a Bayesian approach. To render estimation feasible, the structure of the economy can be exploited and the dimensionality of the model automatically reduced based on the Bayesian priors. We apply this approach to analyze how much inequality matters for the business cycle and vice versa. Even when the model is estimated on aggregate data alone and with a set of shocks and frictions designed to match aggregate data, it broadly reproduces observed US inequality dynamics.

JEL-codes: D31 D52 E12 E32 E52 E62 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

Downloads: (external link)
https://www.aeaweb.org/doi/10.1257/aer.20201875 (application/pdf)
https://doi.org/10.3886/E194108V1 (text/html)
https://www.aeaweb.org/doi/10.1257/aer.20201875.appx (application/pdf)
https://www.aeaweb.org/doi/10.1257/aer.20201875.ds (application/zip)
Access to full text is restricted to AEA members and institutional subscribers.

Related works:
Working Paper: Shocks, Frictions, and Inequality in US Business Cycles (2020)
Working Paper: Shocks, Frictions, and Inequality in US Business Cycles (2020)
Working Paper: Shocks, Frictions, and Inequality in US Business Cycles (2020)
Working Paper: Shocks, Frictions, and Inequality in US Business Cycles (2019)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aea:aecrev:v:114:y:2024:i:5:p:1211-47

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

DOI: 10.1257/aer.20201875

Access Statistics for this article

American Economic Review is currently edited by Esther Duflo

More articles in American Economic Review from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().