Monetary policy according to HANK
Greg Kaplan,
Benjamin Moll and
Giovanni L. Violante
No 1899, Working Paper Series from European Central Bank
Abstract:
We revisit the transmission mechanism of monetary policy for household consumption in a Heterogeneous Agent New Keynesian (HANK) model. The model yields empirically realistic distributions of household wealth and marginal propensities to consume because of two key features: multiple assets with different degrees of liquidity and an idiosyncratic income process with leptokurtic income changes. In this environment, the indirect effects of an unexpected cut in interest rates, which operate through a general equilibrium increase in labor demand, far outweigh direct effects such as intertemporal substitution. This finding is in stark contrast to small- and medium-scale Representative Agent New Keynesian (RANK) economies, where intertemporal substitution drives virtually all of the transmission from interest rates to consumption. JEL Classification: D14, D31, E21, E52
Keywords: consumption; earnings kurtosis.; heterogeneous agents; inequality; liquidity; monetary policy; new keynesian (search for similar items in EconPapers)
Date: 2016-04
New Economics Papers: this item is included in nep-cba, nep-dge and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (143)
Downloads: (external link)
https://www.ecb.europa.eu//pub/pdf/scpwps/ecbwp1899.en.pdf (application/pdf)
Related works:
Journal Article: Monetary Policy According to HANK (2018) 
Working Paper: Monetary Policy According to HANK (2017) 
Working Paper: Monetary Policy According to HANK (2016) 
Working Paper: Monetary Policy According to HANK (2016) 
Working Paper: Monetary Policy According to HANK (2016) 
Working Paper: Monetary Policy According to HANK (2015) 
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:ecb:ecbwps:20161899
Access Statistics for this paper
More papers in Working Paper Series from European Central Bank 60640 Frankfurt am Main, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Official Publications ().