Template-Type: ReDIF-Paper 1.0
Title: When Does Household Heterogeneity Matter for Aggregate Fluctuations?
Author-Name: Zheng Gong
Author-Email: zgong@uni-bonn.de

Classification-JEL: D31, E21, E43, E52, E62
Keywords: Heterogeneous households; Monetary Policy; Fiscal Policy; HANKmodel;
Inequality; Business cycles.

Abstract: This paper decomposes a Heterogeneous-Agent New Keynesian (HANK) model’s
responses to aggregate shocks into Representative-Agent (RANK) and redistribution
effects. RANK effects are obtained by introducing counterfactual transfers
neutralizing redistribution, ensuring homogeneous agent responses. Redistribution
effects stem from the HANK model’s response to the derived redistribution
shock, which breaks down into interest rate exposure, income exposure, and liquidity
channels. Following a monetary policy shock, RANK effects explain 62%
of the consumption response; the interest rate, income, and liquidity channels
contribute 16%, 14%, and 8% respectively. The decomposition is also applied to
literature to identify key redistribution channels driving model dynamics.

Note: 
Length: 83
Creation-Date: 2025-01
Revision-Date: 
File-URL: https://www.crctr224.de/research/discussion-papers/archive/dp624
File-Format: application/pdf
Handle: RePEc:bon:boncrc:CRCTR224_2025_624