scholarly journals Using the Sequence‐Space Jacobian to Solve and Estimate Heterogeneous‐Agent Models

Econometrica ◽  
2021 ◽  
Vol 89 (5) ◽  
pp. 2375-2408 ◽  
Author(s):  
Adrien Auclert ◽  
Bence Bardóczy ◽  
Matthew Rognlie ◽  
Ludwig Straub
Keyword(s):  
General Equilibrium ◽  
Sequence Space ◽  
New Keynesian ◽  
New Keynesian Model ◽  
Heterogeneous Agent ◽  
Aggregate Shocks ◽  
Perfect Foresight ◽  
Keynesian Model ◽  
Derivatives Of ◽  
Heterogeneous Agent Models

We propose a general and highly efficient method for solving and estimating general equilibrium heterogeneous‐agent models with aggregate shocks in discrete time. Our approach relies on the rapid computation of sequence‐space Jacobians—the derivatives of perfect‐foresight equilibrium mappings between aggregate sequences around the steady state. Our main contribution is a fast algorithm for calculating Jacobians for a large class of heterogeneous‐agent problems. We combine this algorithm with a systematic approach to composing and inverting Jacobians to solve for general equilibrium impulse responses. We obtain a rapid procedure for likelihood‐based estimation and computation of nonlinear perfect‐foresight transitions. We apply our methods to three canonical heterogeneous‐agent models: a neoclassical model, a New Keynesian model with one asset, and a New Keynesian model with two assets.

How Many Agents are Rational in China’s Economy? Evidence from a Heterogeneous Agent-Based New Keynesian Model

2018 ◽  
Vol 54 (2) ◽  
pp. 575-611 ◽  
Author(s):  
Wei Zhao ◽  
Yi Lu ◽  
Genfu Feng
Keyword(s):  
New Keynesian ◽  
New Keynesian Model ◽  
Heterogeneous Agent ◽  
Agent Based ◽  
Keynesian Model ◽  
China’S Economy

scholarly journals Forward Guidance without Common Knowledge

2018 ◽  
Vol 108 (9) ◽  
pp. 2477-2512 ◽  
Author(s):  
George-Marios Angeletos ◽  
Chen Lian
Keyword(s):  
General Equilibrium ◽  
Common Knowledge ◽  
Feedback Loops ◽  
New Keynesian ◽  
New Keynesian Model ◽  
Aggregate Level ◽  
Standard Practice ◽  
Forward Guidance ◽  
Keynesian Model ◽  
Forward Looking

How does the economy respond to news about future policies or future fundamentals? Standard practice assumes that agents have common knowledge of such news and face no uncertainty about how others will respond. Relaxing this assumption attenuates the general equilibrium effects of news and rationalizes a form of myopia at the aggregate level. We establish these insights within a class of games which nests, but is not limited to, the New Keynesian model. Our results help resolve the forward-guidance puzzle, offer a rationale for the front-loading of fiscal stimuli, and illustrate more broadly the fragility of predictions that rest on long series of forward-looking feedback loops. (JEL D82, D83, D84, E12, E23, E52, E62)

scholarly journals Understanding HANK: Insights From a PRANK

Econometrica ◽  
2020 ◽  
Vol 88 (3) ◽  
pp. 1113-1158 ◽  
Author(s):  
Sushant Acharya ◽  
Keshav Dogra
Keyword(s):  
Monetary Policy ◽  
Fiscal Policy ◽  
Incomplete Markets ◽  
New Keynesian ◽  
New Keynesian Model ◽  
Income Risk ◽  
Heterogeneous Agent ◽  
Liquidity Trap ◽  
Forward Guidance ◽  
Keynesian Model

Using an analytically tractable heterogeneous agent New Keynesian model, we show that whether incomplete markets resolve New Keynesian “paradoxes” depends on the cyclicality of income risk. Incomplete markets reduce the effectiveness of forward guidance and multipliers in a liquidity trap only with procyclical risk. Countercyclical risk amplifies these “puzzles.” Procyclical risk permits determinacy under a peg; countercyclical risk may generate indeterminacy even under the Taylor principle. By affecting the cyclicality of risk, even “passive” fiscal policy influences the effects of monetary policy.

scholarly journals Microeconomic Heterogeneity and Macroeconomic Shocks

2018 ◽  
Vol 32 (3) ◽  
pp. 167-194 ◽  
Author(s):  
Greg Kaplan ◽  
Giovanni L. Violante
Keyword(s):  
Aggregate Demand ◽  
New Keynesian ◽  
Economic Fluctuations ◽  
Macroeconomic Fluctuations ◽  
Cross Sectional ◽  
Representative Agent ◽  
Heterogeneous Agent ◽  
Aggregate Shocks ◽  
Many Sources ◽  
Heterogeneous Agent Models

In this essay, we discuss the emerging literature in macroeconomics that combines heterogeneous agent models, nominal rigidities, and aggregate shocks. This literature opens the door to the analysis of distributional issues, economic fluctuations, and stabilization policies—all within the same framework. In response to the limitations of the representative agent approach to economic fluctuations, a new framework has emerged that combines key features of heterogeneous agents (HA) and New Keynesian (NK) economies. These HANK models offer a much more accurate representation of household consumption behavior and can generate realistic distributions of income, wealth, and, albeit to a lesser degree, household balance sheets. At the same time, they can accommodate many sources of macroeconomic fluctuations, including those driven by aggregate demand. In sum, they provide a rich theoretical framework for quantitative analysis of the interaction between cross-sectional distributions and aggregate dynamics. In this article, we outline a state-of-the-art version of HANK together with its representative agent counterpart, and convey two broad messages about the role of household heterogeneity for the response of the macroeconomy to aggregate shocks: 1) the similarity between the Representative Agent New Keynesian (RANK) and HANK frameworks depends crucially on the shock being analyzed; and 2) certain important macroeconomic questions concerning economic fluctuations can only be addressed within heterogeneous agent models.

Misperceptions and Monetary Policy in a New Keynesian Model

2005 ◽  
Author(s):  
Jarkko P. P. Jääskelä ◽  
Jack McKeown
Keyword(s):  
Monetary Policy ◽  
New Keynesian ◽  
New Keynesian Model ◽  
Keynesian Model

scholarly journals A new Keynesian model with unemployment: The effect of on‐the‐job search

2021 ◽  
Author(s):  
Zeynep Kantur ◽  
Kerim Keskin
Keyword(s):  
Job Search ◽  
New Keynesian ◽  
New Keynesian Model ◽  
Keynesian Model

scholarly journals Optimal control in the New Keynesian model with monetary and fiscal policy interactions

2021 ◽  
Vol 1864 (1) ◽  
pp. 012040
Author(s):  
T A Alexeeva ◽  
N V Kuznetsov ◽  
T N Mokaev ◽  
I A Polshchikova
Keyword(s):  
Optimal Control ◽  
Fiscal Policy ◽  
New Keynesian ◽  
New Keynesian Model ◽  
Policy Interactions ◽  
Keynesian Model ◽  
Monetary And Fiscal Policy

scholarly journals Public Debt and Changing Inflation Targets

2016 ◽  
Vol 8 (4) ◽  
pp. 142-176 ◽  
Author(s):  
Michael U. Krause ◽  
Stéphane Moyen
Keyword(s):  
Central Bank ◽  
Public Debt ◽  
Pronounced Effect ◽  
New Keynesian ◽  
Moderate Increase ◽  
New Keynesian Model ◽  
Inflation Target ◽  
Keynesian Model ◽  
Maturity Structure ◽  
Inflation Targets

What are the effects of a higher central bank inflation target on the burden of real public debt? Several recent proposals have suggested that even a moderate increase in the inflation target can have a pronounced effect on real public debt. We consider this question in a New Keynesian model with a maturity structure of public debt and an imperfectly observed inflation target. We find that moderate changes in the inflation target only have significant effects on real public debt if they are essentially permanent. Moreover, the additional benefits of not communicating a change in the inflation target are minor. (JEL E12, E31, E52, H63)

scholarly journals An estimated New-Keynesian model with unemployment as excess supply of labor

2014 ◽  
Vol 40 ◽  
pp. 338-359 ◽  
Author(s):  
Miguel Casares ◽  
Antonio Moreno ◽  
Jesús Vázquez
Keyword(s):  
New Keynesian ◽  
New Keynesian Model ◽  
Excess Supply ◽  
Keynesian Model

scholarly journals Unemployment in an Estimated New Keynesian Model

2012 ◽  
Author(s):  
Jordi Galí ◽  
Frank Smets ◽  
Rafael Wouters
Keyword(s):  
New Keynesian ◽  
New Keynesian Model ◽  
Keynesian Model
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