E21

Jorge Miranda-Pinto · Daniel Murphy · Kieran James Walsh · Eric R. Young

A common observation from account-level bank data is that low-income, low-liquidity households often use additional income to repay debt rather than consume, and that household-level consumption is …

Rüdiger Bachmann · Benjamin Born · Olga Goldfayn-Frank · Georgi Kocharkov · Ralph Luetticke · Michael Weber

The paper studies Germany's temporary 3 percentage-point VAT cut from July 1 to December 31, 2020 (standard rate 19%→16%, reduced rate 7%→5%), combining two causal identification strategies with …

Sebastian Di Tella · Benjamin Hébert · Pablo Kurlat

Building on the Kaplan-Violante two-account incomplete-markets model, this manuscript shows that once idiosyncratic risk is assumed to rise when asset valuations fall, the aggregate value of each …

Paul A. Samuelson

This 1958 Journal of Political Economy paper by Paul Samuelson builds a deliberately stripped-down model of a world in which goods cannot be stored or invested -- nothing "keeps" -- so people can only …

Andrew B. Abel

A one-parameter-family utility function nests time-separable preferences, "catching up with the Joneses" (utility depends on own consumption relative to lagged aggregate consumption per capita) and …

Elliot Anenberg · Tess Scharlemann · Eileen van Straelen

Does monetary policy stimulate household borrowing and consumption by enabling cash-out mortgage refinancing ("the cash-out refinance channel"), or does it primarily induce substitution across …

Christopher D. Carroll

This paper argues that once consumers face meaningful, uninsurable income risk and are "impatient," they behave as buffer-stock savers who hold a target wealth-to-income ratio and whose average …

Maurice Obstfeld · Kenneth Rogoff

The intertemporal approach treats the current account as the outcome of forward-looking saving and investment decisions rather than as a function of relative prices, and this chapter develops it from …

Emil Holst Partsch · Ivan Petrella · Emiliano Santoro

Consumer durables account for a disproportionately large share of household expenditure fluctuations despite their small share of total private consumption. Two stylized facts motivate the paper: (1) …

Morten O. Ravn · Stephanie Schmitt-Grohé · Martín Uribe

If households form habits over individual goods rather than over a consumption aggregate, the demand a firm faces depends on its own past sales, its pricing problem becomes dynamic, and mark-ups turn …

Francesco Ferrante · Nils Gornemann

Ferrante and Gornemann study the aggregate and redistributive effects of currency devaluations in emerging market economies, focusing on a feature that prior open-economy HANK models had not jointly …

Martin Feldstein · Charles Horioka

Across 16 industrial countries whose saving and investment rates are averaged over 1960-74, a one-percentage-point higher ratio of gross domestic saving to GDP comes with roughly nine-tenths of a …

Rishabh Aggarwal · Adrien Auclert · Matthew Rognlie · Ludwig Straub

In a multi-country heterogeneous-agent New Keynesian model, debt-financed fiscal transfers eventually raise the world interest rate and are entirely absorbed by foreign lenders, but in the short run a …

Jordan Roulleau-Pasdeloup

The paper asks whether an explicit, global, closed-form solution exists for the consumption function in the standard income fluctuation problem with a borrowing constraint and constant income, a …

Adrien Auclert · Matthew Rognlie · Ludwig Straub

Auclert, Rognlie, and Straub review a decade of Heterogeneous-Agent New Keynesian (HANK) research through a single canonical model, showing that monetary and balanced-budget fiscal policy have …

Hanbaek Lee

The repeated transition method solves rich heterogeneous-agent models globally and without perfect foresight by exploiting the ergodicity of a long simulated path -- matching periods with similar …

Jeffrey C. Fuhrer

Standard optimising consumption models make spending jump on impact when a shock hits, which the data flatly contradict; replacing time-separable utility with habit formation gives consumers a motive …

Elena Capatina · Michael Keane

Capatina and Keane build and calibrate a life-cycle model of labor supply and savings for U.S. men that incorporates health shocks, endogenous human capital accumulation via learning-by-doing, …

Emmanuel De Veirman · Jasper De Jong

De Veirman and de Jong develop a new approach to estimating the macroeconomic effects of changes in regulatory loan-to-value (LTV) limits on mortgage loans. The central questions are: (1) how do …

Sergio de Ferra · Kurt Mitman · Federica Romei

This paper builds a Heterogeneous-Agent New-Keynesian Small Open Model Economy (HANKSOME), calibrated to Hungary's pre-2009 current account boom and sudden-stop reversal, and shows that when …

Yves Achdou · Jiequn Han · Jean-Michel Lasry · Pierre-Louis Lions · Benjamin Moll

This paper recasts the Aiyagari-Bewley-Huggett incomplete-markets model in continuous time, showing it reduces to a coupled system of a Hamilton-Jacobi-Bellman equation and a Kolmogorov Forward …

Per Krusell · Anthony A. Smith, Jr.

In a calibrated stochastic growth model where a continuum of households face partially uninsurable employment risk and can self-insure only by holding aggregate capital, the macroeconomic aggregates …

Sergio Villalvazo

This paper studies the cross-sectional dimension of Fisher's (1933) debt-deflation mechanism as it operates during Sudden Stop crises — episodes characterized by large, abrupt reversals in the current …

Matthias Doepke · Martin Schneider

Using Flow-of-Funds and Survey-of-Consumer-Finances data to reconstruct market-value nominal asset and liability positions -- including their maturity structure -- across U.S. sectors and household …

Daniel Lewis · Davide Melcangi · Laura Pilossoph

Lewis, Melcangi, and Pilossoph estimate the unconditional distribution of the marginal propensity to consume (MPC) using the 2008 Economic Stimulus Act (ESA) rebate payments, deploying Gaussian …

Morten O. Ravn · Vincent Sterk

A HANK model that is tractable enough to solve on paper, built by grafting Diamond-Mortensen-Pissarides search frictions onto a New Keynesian economy and then imposing assumptions that make the wealth …

Dirk Krueger · Kurt Mitman · Fabrizio Perri

Using PSID panel data and a calibrated heterogeneous-household business-cycle model, this chapter shows that a sufficiently large mass of low-wealth, non-hand-to-mouth households who sharply raise …

Andreas Fagereng · Luigi Guiso · Luigi Pistaferri

Using Norwegian administrative registries that record wealth and capital income for the whole population, and for each spouse before they marry, this paper documents that people sort at marriage not …

Adrien Auclert · Matthew Rognlie · Ludwig Straub

Estimating a heterogeneous-agent New Keynesian model with "sticky expectations" that simultaneously matches households' large immediate marginal propensities to consume and the hump-shaped aggregate …

Jacob D Orchard · Valerie A Ramey · Johannes F Wieland

Do the high marginal propensities to consume (MPCs) estimated in the leading household studies of the 2008 U.S. tax rebates—particularly Parker et al. (2013), which found MPCs of 50–90 percent within …

Greg Kaplan · Benjamin Moll · Giovanni L. Violante

This paper builds a two-asset Heterogeneous Agent New Keynesian (HANK) model matching the empirical joint distribution of income, liquid, and illiquid wealth, and finds that the indirect effect of an …

Florin O. Bilbiie

THANK, a tractable heterogeneous-agent New Keynesian model built around a single statistic for the cyclicality of income inequality, shows that the conditions needed for HANK-style amplification of …

Xing Guo · Pablo Ottonello · Diego J. Perez

This paper builds an open-economy heterogeneous-agent New Keynesian (HANK) model in which households differ not only in income and wealth but in their real integration (tradable vs. nontradable …

Adrien Auclert

This paper shows that monetary policy affects aggregate consumption not only through the standard income and substitution channels but also through three redistribution channels -- earnings …

Davide Debortoli · Jordi Galí

This paper asks how much of the HANK literature's message about aggregate behaviour survives in a far simpler model, and answers by first identifying exactly what heterogeneity does.

Thomas Winberry · Adrien Auclert · Matthew Rognlie · Ludwig Straub

Winberry, Auclert, Rognlie, and Straub extend the Heterogeneous-Agent New Keynesian framework from households to firms, building a canonical heterogeneous-firm model with financial frictions in which …

S. Rao Aiyagari

Against Chamley's (1986) and Lucas's (1990) result that the optimal long-run capital income tax is zero, this paper shows that in a Bewley-type incomplete-markets economy with uninsured idiosyncratic …

Adrien Auclert · Michael Cai · Matthew Rognlie · Ludwig Straub

Using a new sequence-space method for characterizing the long-run ("Ramsey") steady state of dynamic optimal-taxation problems, this paper finds that for standard calibrations of Aiyagari (1995)-style …

Yves Achdou · Francisco J. Buera · Jean-Michel Lasry · Pierre-Louis Lions · Benjamin Moll

Written explicitly to get mathematicians interested in macroeconomics, this review collects the systems of coupled nonlinear partial differential equations that arise once a macro model tracks a whole …

John H. Cochrane

Using simple two-variable autoregressions of consumption and GNP, and of dividends and stock prices, Cochrane shows that a shock to GNP (or to stock prices) that leaves consumption (or dividends) …

Peter Maxted · David Laibson · Benjamin Moll

Maxted, Laibson, and Moll study fiscal and monetary policy in a partial-equilibrium heterogeneous-agent model in which homeowners have present-biased time preferences (Instantaneous Gratification …

Sebastian Di Tella · Robert Hall

This paper shows that spikes in idiosyncratic risk premiums can generate quantitatively plausible recessions -- with employment, consumption, and investment all falling together -- because the risk …

François Le Grand · Alaïs Martin-Baillon · Xavier Ragot

Should monetary policy deviate from price stability to address redistributive concerns in an economy with heterogeneous agents? The paper jointly solves for optimal monetary and fiscal policy under …

Michael Reiter

This paper proposes a numerical method for solving general-equilibrium models with a continuum of heterogeneous agents that combines projection (a fully nonlinear, high-dimensional representation of …

Yan Bai · Jing Zhang

A frictionless multi-country model implies no cross-country correlation between long-run savings and investment rates, so the Feldstein-Horioka finding really is a puzzle for it. Neither limited …

Harald Uhlig

In a calibrated neoclassical growth model with distortionary labor and capital taxes, an ARRA-style government spending increase produces short-run net-present-value fiscal multipliers above one, but …

Robert E. Hall

This paper shows that if consumers maximize expected lifetime utility subject to an intertemporal budget constraint under uncertain future earnings -- the standard life cycle-permanent income model -- …

Francesco Saverio Gaudio

This paper documents a puzzle for canonical limited-participation models: when U.S. stock market participation rose from 31.6% to 53% between 1989 and 2007—a period also characterized by the Great …

Rajnish Mehra · Edward C. Prescott

This 1985 Journal of Monetary Economics paper by Rajnish Mehra and Edward C. Prescott documents that over 1889-1978 U.S. equities earned about seven percent real return per year on average while …

Marcus Hagedorn · Iourii Manovskii · Kurt Mitman

This paper builds a Heterogeneous Agent New Keynesian (HANK) model with incomplete markets, capital, and nominal price/wage rigidities -- with a government budget constraint specified in nominal terms …

Jesper Böjeryd · Roine Vestman · Björn Tyrefors · Dany Kessel

This paper estimates a causal housing wealth effect on consumption using a quasi-natural experiment in Stockholm, Sweden. The identification exploits an unanticipated political decision — announced in …

Adrien Auclert · Matthew Rognlie · Ludwig Straub

This paper derives an "intertemporal Keynesian cross" showing that intertemporal marginal propensities to consume (iMPCs) are sufficient statistics for the output response of fiscal policy in …

Greg Kaplan · Giovanni L. Violante

This review systematically compares heterogeneous-agent incomplete-markets models to see which model features and calibration strategies can deliver both a realistically large average marginal …

Alisdair McKay · Emi Nakamura · Jón Steinsson

This paper shows that the standard New Keynesian prediction that forward guidance about interest rates far in the future is at least as powerful as guidance about current rates -- and grows …

Ralph Luetticke

In a two-asset HANK model where households hold liquid bonds and illiquid capital, monetary policy transmits mainly through investment rather than consumption, but a tightening redistributes income …

Sushant Acharya · Keshav Dogra

Using an analytically tractable heterogeneous-agent New Keynesian model with CARA preferences and normally distributed idiosyncratic income risk, the paper shows that whether incomplete markets …

S. Rao Aiyagari

This paper builds the standard growth model modified so that a continuum of infinitely-lived agents face uninsured idiosyncratic labor-income risk and a borrowing constraint, and shows that the …

Adrien Auclert · Matthew Rognlie · Ludwig Straub · Tomáš Ťapák

Most heterogeneous-agent New Keynesian (HANK) models take household portfolios as exogenously fixed. This paper develops a sequence-space method for solving instead for endogenous, risk-hedging …