Monetary Policy According to HANK

By Greg Kaplan, Benjamin Moll, Giovanni L. Violante. Social Science Research Network, 2018

1,271 citations recorded by the source corpus.

We revisit the transmission mechanism of monetary policy for household consumption in a Heterogeneous Agent New Keynesian (HANK) model. The model yields empirically realistic distributions of household wealth and marginal propensities to consume because of two key features: multiple assets with different degrees of liquidity and an idiosyncratic income process with leptokurtic income changes. 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 intertemporal substitution drives virtually all of the transmission from interest rates to consumption.

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/01a5fa9a90a445c83eedeef79f72fb444391eb3d

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Citations in the corpus

Transmission of Monetary Policy with Heterogeneity in Household Portfolios (2018, background): “As in Kaplan et al. (2016) there is a wasted intermediation cost, R, when households resort to unsecured borrowing.”
Geographic Cross-Sectional Fiscal Spending Multipliers: What Have We Learned? (2019, background): “, 2016; Kaplan et al., 2016). The rough lower bound result does not depend on these particular features. Indeed, aspects which make the New Keynesian model less forward-looking also rule out one case discussed by Farhi and Werning (2016) in which closed economy zero lower bound deficit-financed spen”
Monetary Policy when Households have Debt: New Evidence on the Transmission Mechanism (2019, neutral): “In Kaplan et al. (2014, 2015), consumers can be wealthy but still behave in a constrained manner if most of their wealth is tied-up in an illiquid asset (such as housing). In other words, mortgagors may become hand to mouth by purchasing a large housing asset with debt. Prima facie evidence that bot”
Monetary Policy Through Production Networks: Evidence from the Stock Market (2017, neutral): “In particular, the direct effect tells us the share of the total response that would materialize if firms would not purchase more intermediate inputs after an expansionary monetary policy shock and therefore has the flavor of the direct effect of monetary policy in Kaplan et al. (2018) which obtains”
IQ, Expectations, and Choice (2019, neutral): “…relationship with economic behavior are Zafar (2011), who studies the formation of expectations by college students, Malmendier and Nagel (2016) and Kuchler and Zafar (2018), who study the effect of personal experiences on expectations about aggregate outcomes, Fuster, Perez-Truglia, Wiederholt,…”
Doves for the Rich, Hawks for the Poor? Distributional Consequences of Monetary Policy (2016, background): “Kaplan et al. (2016), Bayer et al. (2015), and Luetticke (2015) study the transmission of monetary policy shocks or other business-cycle shocks when nominal and real assets have different liquidity characteristics.”
Inequality and Aggregate Demand (2016, positive): “…for fixed effects ωi to hit exactly the cross-sectional standard deviation of earnings levels in 2013, as documented by Song et al. (2016).18 Kaplan et al. (2018)’s earnings process is constructed such that ωi = 0 is enough to do this—in other words, the accumulation of income risk…”
MPC Heterogeneity and Household Balance Sheets (2016, neutral): “19In existing literature, only Kaplan, Moll, and Violante (2016) report 6-month MPCs.”
The Fiscal Multiplier (2019, neutral): “, Kaplan et al. (2018). Combining the expansionary output effects of the fiscal stimulus and the contractionary effects of monetary policy yields a”
The Intertemporal Keynesian Cross (2018, positive): “Guerrieri and Lorenzoni (2017), McKay and Reis (2016), McKay, Nakamura and Steinsson (2016) and Kaplan, Moll and Violante (2018) study the same issues in models of precautionary savings with or without illiquidity.”
How Does Monetary Policy Affect Income and Wealth Inequality? Evidence from Quantitative Easing in the Euro Area (2018, background): “…the debate on the relative importance of direct and indirect effects of monetary policy on consumption, since such effects can be estimated only by considering the transmission channels involving both income and wealth (Kaplan et al., 2018; Auclert, 2019; Slacalek et al., 2020; Holm et al., 2021).”