Reconciling the Effects of Monetary Policy Actions on Consumption Within a Heterogeneous Agent Framework

Yamin Ahmad

Working Papers from UW-Whitewater, Department of Economics

Abstract: This paper incorporates heterogeneous agents into a NNS model with nominal inertia. Heterogeneous households are introduced into NNS models to try and reconcile the movements in interest rates, consumption and inflation. The key findings here are that heterogeneity and wage inertia are needed to help reconcile these observations. Aggregate consumption and its expected growth rate responds much more to myopic households than compared to optimizing households when myopic households set wages one periods in advance. When myopic households set wages in the current period, aggregate consumption and its expected growth rate is found to respond much more to the respective profiles for optimizing households.

Keywords: Consumption; Aggregation; Interest Rates; Heterogeneity; Monetary Policy (search for similar items in EconPapers)
JEL-codes: E27 E47 E52 (search for similar items in EconPapers)
Pages: 51 pages
Date: 2004-07, Revised 2006-07
New Economics Papers: this item is included in nep-cba, nep-dge, nep-mac and nep-mon
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Related works:
Working Paper: Reconciling The Effects of Monetary Policy Actions on Consumption Within A Heterogeneous Agent Framework (2005)
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