Heterogeneous Agent Macro

Volha Audzei · Ivan Sutóris

Audzei and Sutóris ask whether inflation-targeting monetary policy affects households' incentives to invest in energy conservation, and whether the standard central bank response to energy price …

Thomas Winberry

A method for solving heterogeneous-agent models with aggregate shocks that replaces the infinite-dimensional distribution with a flexible parametric family, treats that family's moments as endogenous …

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 …

Anmol Bhandari · Thomas Bourany · David Evans · Mikhail Golosov

This paper reformulates perturbation approximation of heterogeneous-agent models as the problem of finding directional derivatives that solve small, analytically-characterized linear systems -- a …

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 …

Merike Kukk · Jan Toczynski · Christoph Basten

Households are exposed to different rates of inflation because they buy different things, and using anonymised quarterly bank-account records for 89,507 individuals at one of Estonia's leading …

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 …

Jiequn Han · Yucheng Yang · Weinan E

DeepHAM represents the distribution of agents through a small set of algorithmically-learned "generalized moments" and uses deep neural networks trained on directly simulated paths to globally solve …

Adrien Auclert · Evan Majic · Matthew Rognlie · Ludwig Straub

Auclert, Majic, Rognlie, and Straub show that the sequence-space Jacobians used to solve macro models with rich heterogeneity have a special "quasi-Toeplitz" mathematical structure, which yields a …

Hanno Kase · Leonardo Melosi · Matthias Rottner

By treating a nonlinear model's own parameters as extra "pseudo state variables" that a neural network learns to solve for across the entire parameter space at once, and by training a second network …

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 …

Adrien Auclert · Matthew Rognlie · Martin Souchier · Ludwig Straub

Introducing heterogeneous households with realistically high marginal propensities to consume into an otherwise-standard small open economy New Keynesian model creates a powerful real income channel …

Timo Boppart · Per Krusell · Kurt Mitman

This paper proposes computing the aggregate-uncertainty equilibrium of a heterogeneous-agent model by solving, entirely with standard nonlinear methods, the deterministic transition path back to …

Pablo Ottonello · Thomas Winberry

Combining high-frequency-identified monetary shocks with Compustat data, the paper shows that low-default-risk firms -- those with lower leverage and higher distance to default -- are substantially …

Priit Jeenas

Contrary to treating corporate cash as simply negative debt, this paper shows that firms' liquid-asset holdings, not their leverage, robustly predict which firms cut investment most after a monetary …

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 …

Davide Debortoli · Jordi Galí

By building three nested HANK economies and then constructing a deliberately simple two-agent counterpart for each, this paper argues that what household heterogeneity does to aggregate output can be …

Adrien Auclert · Rodolfo Rigato · Matthew Rognlie · Ludwig Straub

This paper extends the "certainty equivalence" shortcut that makes first-order sequence-space methods fast for heterogeneous-agent models to second and third order, showing that these higher-order …

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 …

Iván Werning

This paper derives a generalized Euler relation for aggregate consumption in incomplete-markets economies with idiosyncratic income risk, and shows that under specific benchmark conditions -- zero …

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 …

Adrien Auclert · Hugo Monnery · Matthew Rognlie · Ludwig Straub

In a heterogeneous-agent New Keynesian model of an energy-importing small open economy, realistically high MPCs combined with a realistically low elasticity of substitution between energy and other …

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 …

Andreas Schaab

Using a new global solution method for a HANK model with counter-cyclical unemployment risk and a zero lower bound, this job-market paper shows that the dominant transmission channel of macroeconomic …

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 …

Greg Kaplan · Giovanni L. Violante

This essay argues that the Great Recession exposed how badly representative-agent models capture household consumption behavior, and outlines the emerging Heterogeneous Agent New Keynesian (HANK) …

George J. Bratsiotis · Kasun D. Pathirage

This paper introduces a four-agent estimated New Keynesian DSGE model—comprising banked simple households, underbanked simple households, firm owners, and bank owners—to examine agent-specific and …

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.

Adrien Auclert · Bence Bardóczy · Matthew Rognlie

This paper shows that New Keynesian models with frictionless labor supply cannot simultaneously match three well-established empirical facts -- high marginal propensities to consume, low marginal …

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 …

Sushant Acharya · Edouard Challe · Keshav Dogra

An analytically tractable heterogeneous-agent New Keynesian (HANK) model in which a utilitarian planner's optimal monetary policy departs from the representative-agent benchmark because interest rates …

Eduardo Dávila · Andreas Schaab

This paper characterizes optimal monetary policy in a heterogeneous-agent New Keynesian (HANK) model with wage rigidity, showing that a discretionary utilitarian planner's desire to redistribute …

Alisdair McKay · Christian K. Wolf

This paper characterizes optimal monetary and fiscal policy rules in a heterogeneous-agent New Keynesian (HANK) model and finds that a "dual mandate" central bank's optimal targeting rule is identical …

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 …

Kazuo Mino · Hiroaki Sasaki

This paper asks how population aging changes the distribution of income and wealth, using a continuous-time overlapping-generations model in which persistent growth in per capita income is sustained …

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 …

Jonathan Heathcote · Kjetil Storesletten · Giovanni L. Violante

This review organizes the quantitative macroeconomics literature on household heterogeneity around the "standard incomplete markets" model, asking what sources of individual risk matter most, what …

Ojasvita Bahl · Chetan Ghate · Debdulal Mallick

Governments in emerging market and developing economies (EMDEs) routinely intervene in agricultural markets — procuring grain and redistributing it to poor households — in response to food price …

Federico Mandelman · Mishita Mehra · Hewei Shen

High-skilled immigration policy frictions—particularly the H-1B visa lottery, fixed annual cap, and associated compliance costs—impose well-known burdens on firms, but their disproportionate impact on …

Christian Bayer · Ralph Luetticke

A solution method for discrete-time heterogeneous-agent models with aggregate risk that extends Reiter's perturbation approach by compressing the state space after the no-aggregate-risk stationary …

Adrien Bilal

Treating the cross-sectional distribution as an explicit state variable turns a heterogeneous-agent economy into a single, low-dimensional "Master Equation," and this paper shows that its first- and …

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 …

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 …

Yucheng Yang · Chiyuan Wang · Andreas Schaab · Benjamin Moll

By replacing the cross-sectional distribution with low-dimensional current prices as the state variable and letting agents learn equilibrium price dynamics from simulated paths -- while still …

Andrew Caplin · Victoria Gregory · Eungik Lee · Søren Leth-Petersen · Johan Sæverud

The paper introduces a survey instrument — fielded in the Copenhagen Life Panel in January 2021 to about 10,900 employed Danes aged 20-65 — that measures how much earnings risk workers subjectively …

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 …

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 …

Tobias Broer · Niels-Jakob H. Hansen · Per Krusell · Erik Öberg

This paper shows that the standard New Keynesian monetary transmission mechanism -- in which a rate cut raises output and employment -- breaks down in the simplest possible heterogeneous-agent version …

Ömer T. Açikgöz · Marcus Hagedorn · Hans A. Holter · Yikai Wang

Solving the full dynamic Ramsey optimal-taxation problem (not just the welfare-maximizing steady state) in an Aiyagari (1995)-style incomplete-markets economy, this paper proves the long-run optimal …

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 …

YiLi Chien · Yi Wen

This paper proves that the "interior" Ramsey steady state routinely assumed in heterogeneous-agent optimal-taxation models -- with a modified-golden-rule interest rate and a positive capital tax, as …

Alisdair McKay · Ricardo Reis

This paper builds a business-cycle model merging the standard incomplete-markets model with the New Keynesian model of nominal rigidities to quantify how much automatic fiscal stabilizers (progressive …

Benjamin Moll

This essay argues that rational expectations about equilibrium prices -- which in heterogeneous-agent models means forecasting prices by forecasting the entire cross-sectional distribution, via an …

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 …

Ding Dong · Zheng Liu · Pengfei Wang

Firm-level evidence shows that recessions are characterized not just by aggregate downturns but by a sharp rise in turbulence—a reshuffling of firms' productivity rankings in which high-productivity …

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 · Bence Bardóczy · Matthew Rognlie · Ludwig Straub

Auclert, Bardóczy, Rognlie, and Straub introduce the "sequence-space Jacobian," a fast algorithm for computing the first-order derivatives of general-equilibrium heterogeneous-agent models with …

Nicholas Kozeniauskas

The entrepreneurship rate in the United States—defined as the share of the labor force who own and actively manage a business with at least ten employees—declined by 26% between 1987 and 2015, a …

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 …

SeHyoun Ahn · Greg Kaplan · Benjamin Moll · Thomas Winberry · Christian Wolf

This paper develops a continuous-time method for solving heterogeneous-agent models with aggregate shocks by linearizing around a nonlinearly computed stationary equilibrium (extending Reiter's …