Heterogeneity and aggregate fluctuations: insights from TANK models

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• dc.contributor.author Debortoli, Davide
• dc.contributor.author Galí, Jordi
• dc.contributor.other Universitat Pompeu Fabra. Departament d'Economia i Empresa
• dc.date.accessioned 2024-11-14T10:09:40Z
• dc.date.available 2024-11-14T10:09:40Z
• dc.date.issued 2024-03-01
• dc.date.modified 2024-11-14T10:09:17Z
• 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 iliquid 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.
• dc.format.mimetype application/pdf*
• dc.identifier https://econ-papers.upf.edu/ca/paper.php?id=1882
• dc.identifier.citation
• dc.identifier.uri http://hdl.handle.net/10230/68576
• dc.language.iso eng
• dc.relation.ispartofseries Economics and Business Working Papers Series; 1882
• dc.rights L'accés als continguts d'aquest document queda condicionat a l'acceptació de les condicions d'ús establertes per la següent llicència Creative Commons
• dc.rights.accessRights info:eu-repo/semantics/openAccess
• dc.rights.uri http://creativecommons.org/licenses/by-nc-nd/3.0/es/
• dc.subject.keyword monetary policy
• dc.subject.keyword idiosyncratic income risk
• dc.subject.keyword incomplete markets
• dc.subject.keyword representative household
• dc.subject.keyword new keynesian model
• dc.subject.keyword hank models
• dc.subject.keyword Macroeconomics and International Economics
• dc.title Heterogeneity and aggregate fluctuations: insights from TANK models
• dc.title.alternative
• dc.type info:eu-repo/semantics/workingPaper