A HANK2 model of monetary unions

Christian Bayer, Alexander Kriwoluzky, Müller, Gernot and Fabian Seyrich
Authors registered in the RePEc Author Service: Gernot J. Müller

No 18258, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: How does a monetary union alter the impact of business cycle shocks at the household level? We develop a Heterogeneous Agent New Keynesian model of two countries (HANK²) and show in closed form that a monetary union shifts the adjustment to a shock horizontally - across countries - within the brackets of the union-wide wealth distribution rather than vertically - that is, across the brackets of the union-wide wealth distribution. Calibrating the model to the euro area reveals that a monetary union alters the impact of shocks most strongly in the tails of the wealth distribution but leaves the middle class almost unaffected.

Keywords: Two-country; model (search for similar items in EconPapers)
JEL-codes: D31 E52 F45 (search for similar items in EconPapers)
Date: 2023-07
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Related works:
Journal Article: A HANK2 model of monetary unions (2024)
Working Paper: A HANK² Model of Monetary Unions (2023)
Working Paper: A HANK2 Model of Monetary Unions (2023)
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