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Keywords:Heterogeneous-agent New Keynesian (HANK) model 

Quantitative Easing and Inequality

This paper studies how quantitative easing (QE) affects household welfare across the wealth distribution. I build a Heterogeneous Agent New Keynesian (HANK) model with household portfolio choice, wage and price rigidities, endogenous unemployment, frictional financial intermediation, an effective lower bound (ELB) on the policy rate, forward guidance, and QE. To quantify the contribution of the various channels through which monetary policy affects inequality, I estimate the model using Bayesian methods, explicitly taking into account the occasionally binding ELB constraint and the QE ...
Staff Reports , Paper 1108

Working Paper
Asset supply and liquidity transformation in HANK

We study how the financial sector affects fiscal and monetary policy in heterogeneous agent New Keynesian (HANK) economies. We show that, in a large class of models of financial intermediation, relevant features of the financial sector are summarized by the elasticities of a liquid asset supply function. The financial sector in these models affects aggregate responses only through its ability to perform liquidity transformation (i.e., issue liquid assets to finance illiquid capital). If liquid asset supply responds inelastically to returns on capital (low cross-price elasticities), ...
Working Papers , Paper 2022-038

Estimating HANK for Central Banks

We provide a toolkit for efficient online estimation of heterogeneous agent (HA) New Keynesian (NK) models based on Sequential Monte Carlo methods. We use this toolkit to compare the out-of-sample forecasting accuracy of a prominent HANK model, Bayer et al. (2022), to that of the representative agent (RA) NK model of Smets and Wouters (2007, SW). We find that HANK’s accuracy for real activity variables is notably inferior to that of SW. The results for consumption in particular are disappointing since the main difference between RANK and HANK is the replacement of the RA Euler equation with ...
Staff Reports , Paper 1071

Working Paper
Labor Market Shocks and Monetary Policy

We develop a heterogeneous-agent New Keynesian model featuring a frictional labor market with on-the-job search to quantitatively study the role of worker flows in inflation dynamics and monetary policy. Motivated by our empirical finding that the historical negative correlation between the unemployment rate and the employer-to-employer (EE) transition rate up to the Great Recession disappeared during the recovery, we use the model to quantify the effect of EE transitions on inflation in this period. We find that the four-quarter inflation rate would have been 0.6 percentage points higher ...
Working Papers , Paper 2022-016

Working Paper
Financial Intermediation and Aggregate Demand: A Sufficient Statistics Approach

We provide a unified framework to study how the financial sector affects the transmission of macroeconomic policies, such as monetary and fiscal policies, and asset purchase programs. Our framework nests models of financial intermediation with various microfoundations and allows for rich household heterogeneity. The financial sector supplies liquidity by issuing liquid assets to finance illiquid capital. The elasticities of liquidity supply with respect to returns are sufficient statistics that summarize how the financial sector determines responses to policy through asset markets. This asset ...
Working Papers , Paper 2022-038



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