EconPapers    
Economics at your fingertips  
 

Spillovers and Spillbacks

Sushant Acharya and Paolo Pesenti

No 18900, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We study international monetary policy spillovers and spillbacks in a tractable two-country Heterogeneous Agent New Keynesian model. Relative to Representative Agent (RANK) models, our framework introduces a precautionary-savings channel, as households in both countries face uninsurable income risk, and a real-income channel, as households have heterogeneous marginal propensities to consume (MPC). While both channels amplify the size of spillovers/spillbacks, only precautionary savings can change their sign relative to RANK. Spillovers are likely to be larger in economies with higher fractions of high MPC households and more countercyclical income risk. Quantitatively, both channels amplify spillovers by 30-60% relative to RANK.

Keywords: Monetary policy spillovers; Incomplete markets; Precautionary savings; Real-income channel (search for similar items in EconPapers)
JEL-codes: E50 F41 F42 (search for similar items in EconPapers)
Date: 2024-03
References: Add references at CitEc
Citations:

Downloads: (external link)
https://cepr.org/publications/DP18900 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Working Paper: Spillovers and Spillbacks (2024) Downloads
Working Paper: Spillovers and Spillbacks (2024) Downloads
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:cpr:ceprdp:18900

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP18900

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().

 
Page updated 2024-11-12
Handle: RePEc:cpr:ceprdp:18900