When Inequality Matters for Macro and Macro Matters for Inequality
By S. Ahn, Greg Kaplan, Benjamin Moll, T. Winberry, Christian K. Wolf. NBER macroeconomics annual, 2018
187 citations recorded by the source corpus.
We develop an efficient and easy to use computational method for solving a wide class of general equilibrium heterogeneous agent models with aggregate shocks together with an open source suite of codes that implement our algorithms in an easy to use toolbox. Our method extends standard linearization techniques and is designed to work in cases when inequality matters for the dynamics of macroeconomic aggregates. We present two applications that analyze a two asset incomplete markets model parameterized to match the distribution of income, wealth, and marginal propensities to consume. First, we show that our model is consistent with two key features of aggregate consumption dynamics that are difficult to match with representative agent models: (1) the sensitivity of aggregate consumption to predictable changes in aggregate income, and (2) the relative smoothness of aggregate consumption. Second, we extend the model to feature capital-skill complementarity and show how factor-specific productivity shocks shape dynamics of income and consumption inequality.
Subfields: Economics and Econometrics
View Paper: https://www.semanticscholar.org/paper/709a0fc8c59a554b351ec1f6d1ab0adaa4a7079e
How researchers see this paper
The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.
In Economics and Econometrics
Citations in the corpus
- On DSGE Models (2018, unknown): “27See also Ahn et al. (2017) who develop an e cient and easy-to-use computational method for solving a wide class of heterogeneous agent DSGE models with aggregate shocks.”
- Monetary Policy According to HANK (2018, unknown): “The computational method recently developed by Ahn et al. (forthcoming) will allow future HANK models to incorporate aggregate fluctuations into the economic environment. Third, in HANK the way that fiscal policy responds to an interest rate change profoundly affects the overall effectiveness of mon”
- Financial Frictions and the Wealth Distribution (2019, unknown): “Ahn et al. (2017) introduce a related method to compute the solution to heterogeneous agent models with aggregate shocks in continuous time.”
- Transmission of Monetary Policy with Heterogeneity in Household Portfolios (2018, background): “Ahn et al. (2018) and different from Winberry (2018) and Reiter (2009). I define the polynomial basis functions such that the grid points of the full grid coincide with the Chebyshev nodes for this basis.”