Household Savings and Monetary Policy under Individual and Aggregate Stochastic Volatility

Yuriy Gorodnichenko, Serguei Maliar and Christopher Naubert

No 15614, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We study a heterogeneous-agent model with sticky-prices in which total factor productivity and individual productivity are subject to stochastic volatility shocks. Agents save through liquid bonds and illiquid capital and shares. To construct equilibrium, we use a deep learning algorithm. Our method preserves non-linearities, which is essential for understanding portfolio choices. With rich heterogeneity at the household level, we are able to quantify the impact of uncertainty across the income and wealth distribution. We find that persistent high levels of uncertainty increase wealth inequality, and that in response to a contractionary monetary policy shock, illiquid wealth inequality decreases and liquid wealth inequality increases

Keywords: Machine learning; Deep learning; Neural network; Hank; Heterogeneous agents (search for similar items in EconPapers)
Date: 2020-12
New Economics Papers: this item is included in nep-big, nep-cmp, nep-cwa and nep-dge
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Citations: View citations in EconPapers (6)

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