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April 24, 2020 9:31 PM   Subscribe

On the podcast Macro Musings, Ben Moll is interviewed about Heterogenous Agent New Keynsian economic models [transcript] and how cutting-edge modeling applies to economic policymaking. ButHeterogeneous agents macroeconomics has a long history, even if these particular models are new: "Recent [2017] economic events cast doubt on the standard macroeconomic models. This column looks at new economic models built on the idea that inequality and income risk matter for the business cycle and long-run outcomes. While still in their infancy, these models show promise in addressing the concerns about the old New Keynesian models, and in bringing about a shift in the way that macroeconomists think about aggregate fluctuations and stabilisation policy."

Understanding Heterogeneous Agent New Keynesian Models: Insights from a PRANK

Ben Moll at the LSE, Incorporating Heterogeneity into Monetary Policy Models: Lessons and Challenges [PDF]
Monetary Policy According to HANK[PDF], G. Kaplan, B. Moll, G. Violante - We revisit the transmission mechanism from monetary policy to household consumption in a Heterogeneous Agent New Keynesian (HANK) model. The model yields empirically realistic distributions of wealth and marginal propensities to consume because of two features: uninsurable income shocks and multiple assets with different degrees of liquidity and different returns. In this environment, the indirect effects of an unexpected cut in interest rates, which operate through a general equilibrium increase in labor demand, far outweigh direct effects such as intertemporal substitution. This finding is in stark contrast to small- and medium-scale Representative Agent New Keynesian (RANK) economies, where the substitution channel drives virtually all of the transmission from interest rates to consumption. Failure of Ricardian equivalence implies that, in HANKnmodels, the fiscal reaction to the monetary expansion is a key determinant of the overall size of the macroeconomic response.

what about other models?
Monetary Policy with Heterogeneous Agents: Insights from TANK models[PDF], D. Debortoli and J. Gali
The New Keynesian Transmission Mechanism: A Heterogeneous-Agent Perspective[PDF], Broer et al.
posted by the man of twists and turns (3 comments total) 13 users marked this as a favorite
This is alarmingly specific in a way that I am into, even though this isn’t the flavor of heterogeneity I study.
posted by dismas at 10:02 PM on April 24, 2020

I sell propane and propane accessories
posted by avocet at 10:24 AM on April 25, 2020 [2 favorites]

I thought it was interesting that the transcript talks about different winners-losers from economic policy among the three classes that fall out of the model, and they talk a lot about actual central bankers being introduced to the model, but not at all about the political effects of admitting there are different classes.
posted by clew at 10:39 PM on April 25, 2020

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