Monetary Policy According to HANK

Kaplan, Greg; Moll, Benjamin; Violante, Giovanni L.

doi:10.2139/ssrn.2778504

Cited by 107 publications

(167 citation statements)

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“…As with all models, many possibly relevant features are left out in our model. We however hope that the framework proposed here -which allows to mix together income inequalities and confidence feedback mediated by heterogeneous social networks -can be welded with other approaches, such as popular HANK models for example [16]. This would improve our understanding of economic recessions and their impact on the different strata of the society.…”

Section: Summary Conclusionmentioning

confidence: 90%

“…In recent years, efforts have been made to include in these models ingredients that were sorely missing from the benchmark model [10], like financial markets. Attempts have been made to move away from the "Representative Agent" paradigm, by including different categories of households -hand-to-mouth vs. well-off in TANK (Two-Agent New Keynesian) models [11][12][13][14] -or heterogeneous households with a continuum of possible accumulated wealth, as in HANK (Heterogeneous Agent New Keynesian) models [15][16][17][18][19][20]; see also [21] for a different approach leading to emergent heterogeneities.…”

Section: Introductionmentioning

confidence: 99%

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Crisis Propagation in a Heterogeneous Self-Reflexive DSGE Model

Morelli¹,

Benzaquen²,

Bouchaud³

et al. 2021

Preprint

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We study a self-reflexive DSGE model with heterogeneous households, aimed at characterising the impact of economic recessions on the different strata of the society. Our framework allows to analyse the combined effect of income inequalities and confidence feedback mediated by heterogeneous social networks. By varying the parameters of the model, we find different crisis typologies: loss of confidence may propagate mostly within high income households, or mostly within low income households, with a rather sharp crossover between the two. We find that crises are more severe for segregated networks (where confidence feedback is essentially mediated between agents of the same social class), for which cascading contagion effects are stronger. For the same reason, larger income inequalities tend to reduce, in our model, the probability of global crises. Finally, we are able to reproduce a perhaps counter-intuitive empirical finding: in countries with higher Gini coefficients, the consumption of the lowest income households tends to drop less than that of the highest incomes in crisis times.

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Section: Summary Conclusionmentioning

confidence: 90%

Section: Introductionmentioning

confidence: 99%

Crisis Propagation in a Heterogeneous Self-Reflexive DSGE Model

Morelli¹,

Benzaquen²,

Bouchaud³

et al. 2021

Preprint

View full text Add to dashboard Cite

show abstract

“…In this paper, we developed a parsimonious stylized model which, in our objectives, adds several dimensions of interest to the standard epidemiological components of general economic models in which the policy trade-off between economic activity and epidemic diffusion is evaluated, as, e.g., in Atkeson (2020), Alvarez et al (2020, Kaplan et al (2020). Both the geographic and the network dimension appear very relevant in several empirical analyses of the effects of the SARS-CoV-2 epidemic, which tend to concentrate on economic activity granular level.…”

Section: Discussionmentioning

confidence: 99%

“…For the current SARS-CoV-2 epidemics, R 0 is reasonably estimated between 2.5 and 3.5. 24 The daily rate of growth of the infection g is estimated = .35 by Kaplan et al (2020). 25 This implies, from Equation (2), that T inf is between 4 and 7 days (respectively for R 0 between 2.5 and 3.5).…”

Section: Infection and Contact Ratesmentioning

confidence: 99%

Spatial-SIR with Network Structure and Behavior: Lockdown Rules and the Lucas Critique

Bisin¹,

Moro²

2021

Preprint

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We introduce a model of the diffusion of an epidemic with demographically heterogeneous agents interacting socially on a spatially structured network. Contagion-risk averse agents respond behaviorally to the diffusion of the infections by limiting their social interactions. Firms also respond by allowing employees to work remotely, depending on their productivity. The spatial structure induces local herd immunities along sociodemographic dimensions, which significantly affect the dynamics of infections. We study several non-pharmaceutical interventions; e.g., i) lockdown rules, which set thresholds on the spread of the infection for the closing and reopening of economic activities; and ii) selective lockdowns, which restrict social interactions by location (in the network) and by the demographic characteristics of the agents. Substantiating a "Lucas critique" argument, we assess the cost of naive discretionary policies ignoring agents and firms' behavioral responses.

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“…Continuum rational expectations models overcome some of the heterogeneity-related shortcomings of those models by replacing the representative household with a continuum of households that are ex ante differentiated by their assets and labour productivity. The canonical example is the heterogeneous agent New Keynesian (HANK) model (Kaplan et al, 2018). Macroeconomic agent-based models differ in that they simulate agents as discrete entities but also typically make very different assumptions to, say, RANK or HANK models; the most important being that they tend not to assume rational expectations/perfect foresight and they may not necessarily have competitive markets.…”

Section: Introductionmentioning

confidence: 99%

Solving Heterogeneous General Equilibrium Economic Models with Deep Reinforcement Learning

Hill,

Bardoscia,

Turrell

2021

Preprint

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General equilibrium macroeconomic models are a core tool used by policymakers to understand a nation's economy. They represent the economy as a collection of forward-looking actors whose behaviours combine, possibly with stochastic effects, to determine global variables (such as prices) in a dynamic equilibrium. However, standard semi-analytical techniques for solving these models make it difficult to include the important effects of heterogeneous economic actors. The COVID-19 pandemic has further highlighted the importance of heterogeneity, for example in age and sector of employment, in macroeconomic outcomes and the need for models that can more easily incorporate it. We use techniques from reinforcement learning to solve such models incorporating heterogeneous agents in a way that is simple, extensible, and computationally efficient. We demonstrate the method's accuracy and stability on a toy problem for which there is a known analytical solution, its versatility by solving a general equilibrium problem that includes global stochasticity, and its flexibility by solving a combined macroeconomic and epidemiological model to explore the economic and health implications of a pandemic. The latter successfully captures plausible economic behaviours induced by differential health risks by age.

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Monetary Policy According to HANK

Cited by 107 publications

References 0 publications

Crisis Propagation in a Heterogeneous Self-Reflexive DSGE Model

Crisis Propagation in a Heterogeneous Self-Reflexive DSGE Model

Spatial-SIR with Network Structure and Behavior: Lockdown Rules and the Lucas Critique

Solving Heterogeneous General Equilibrium Economic Models with Deep Reinforcement Learning

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