The New Keynesian cross

By Florin O. Bilbiie. Journal of Monetary Economics, 2020

159 citations recorded by the source corpus.

Abstract The New Keynesian (NK) cross is a graphical and analytical apparatus for heterogeneous-agent (HANK) models expressing key aggregate demand objects—MPC and multipliers—as functions of heterogeneity parameters. It affords analytical insights into monetary, fiscal, and forward guidance multipliers, and replicates the aggregate implications of quantitative HANK. The key parameter—the constrained agents’ income elasticity to aggregate income—depends on fiscal redistribution: when it is larger (smaller) than one, the effects of policies and shocks are amplified (dampened). With uninsurable idiosyncratic uncertainty, this translates intertemporally—through compounding (discounting) in the aggregate Euler equation—into further amplification (dampening) of future shocks.

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/78c64138e3346b802a12d66d703c2cdffc037973

Citations in the corpus

• Monetary Policy and Heterogeneity: An Analytical Framework (2018, unknown): “This model thus captures three distinct AD channels relative to RANK: (i) the TANK channel of cyclical inequality without risk operating in e.g. Bilbiie (2008, 2017) and Debortoli and Galí (2018); (ii) the HANK-specific, cyclical-inequality component due to self-insurance– essentially adding…”