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Discussion Paper Details

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Title: Macroeconomics with Heterogeneous Agents and Input-Output Networks

Author(s): David Rezza Baqaee and Emmanuel Farhi

Publication Date: June 2018

Keyword(s): aggregation, comovement, Heterogeneous Agents, production networks and propagation

Programme Area(s): Macroeconomics and Growth and Monetary Economics and Fluctuations

Abstract: The goal of this paper is to simultaneously unbundle two interacting reduced-form building blocks of traditional macroeconomic models: the representative agent and the aggregate production function. We introduce a broad class of disaggregated general equilibrium models with Heterogeneous Agents and Input-Output networks (HA-IO). We characterize their properties through two sets of results describing the propagation and the aggregation of shocks. Our results shed light on many seemingly disparate applied questions, such as: sectoral comovement in business cycles; factor-biased technical change in task-based models; structural transformation; the effects of corporate taxation; and the dependence of fiscal multipliers on the composition of government spending.

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Bibliographic Reference

Baqaee, D and Farhi, E. 2018. 'Macroeconomics with Heterogeneous Agents and Input-Output Networks'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=13006