Fiscal multipliers: A heterogeneous‐agent perspective

Tobias Broer, Per Krusell and Erik Öberg

Quantitative Economics, 2023, vol. 14, issue 3, 799-816

Abstract: We use an analytically tractable heterogeneous‐agent (HANK) version of the standard New Keynesian model to show how the size of fiscal multipliers depends on (i) the distribution of factor incomes, and (ii) the source of nominal rigidities. With sticky prices but flexible wages, the standard representative‐agent (RANK) model predicts large multipliers because profits fall after a fiscal stimulus and the resulting negative income effect makes the representative worker work harder. Our HANK model, where workers do not own stock, and thus do not receive profit income, predicts smaller fiscal multipliers. In fact, they are smaller with sticky prices than with flexible prices. When wages are the source of nominal rigidity, in contrast, fiscal multipliers are close to one, independently of income heterogeneity and price stickiness.

Date: 2023
References: View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.3982/QE1901

Related works:
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:wly:quante:v:14:y:2023:i:3:p:799-816

Ordering information: This journal article can be ordered from
https://www.econometricsociety.org/membership

Access Statistics for this article

More articles in Quantitative Economics from Econometric Society Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().