Heterogeneity and aggregate fluctuations: insights from TANK models
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- dc.contributor.author Debortoli, Davide
- dc.contributor.author Galí, Jordi, 1961-
- dc.date.accessioned 2024-03-22T10:46:16Z
- dc.date.available 2024-03-22T10:46:16Z
- dc.date.issued 2024-03
- dc.description.abstract We analyze the merits and limitations of simple tractable New Keynesian models (RANK and TANK) in accounting for the aggregate predictions of Heterogenous Agent New Keynesian models (HANK). By means of comparison of a number of nested HANK models, we isolate the role played by (i) idiosyncratic income risk, (ii) a binding borrowing constraint, and (iii) a portfolio choice between liquid and illiquid assets. We argue that the effects of household heterogeneity can be largely understood looking at the differential behavior of two types of households, hand-to-mouth and unconstrained, We find that a suitably specified and calibrated TANK model (which abstracts from idiosyncratic income risk) captures reasonably well the aggregate implications of household heterogeneity and the main channels through which it operates. That ability increases in the presence of a policy rule that emphasizes inflation stability. In the limiting case of a strict inflation targeting policy, heterogeneity becomes irrelevant for the determination of aggregate output.ca
- dc.format.mimetype application/pdf*
- dc.identifier.uri http://hdl.handle.net/10230/59524
- dc.language eng
- dc.language.iso engca
- dc.rights.accessRights info:eu-repo/semantics/openAccessca
- dc.subject.keyword Monetary policyen
- dc.subject.keyword Idiosyncratic income risken
- dc.subject.keyword Incomplete marketsen
- dc.subject.keyword Representative householden
- dc.subject.keyword New Keynesian modelen
- dc.title Heterogeneity and aggregate fluctuations: insights from TANK modelsca
- dc.type info:eu-repo/semantics/workingPaperca