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Title: Micro Jumps, Macro Humps: Monetary Policy and Business Cycles in an Estimated HANK Model

Author(s): Adrien Auclert, Matthew Rognlie and Ludwig Straub

Publication Date: January 2020

Keyword(s): estimation, HANK and investment

Programme Area(s): Monetary Economics and Fluctuations

Abstract: We estimate a Heterogeneous-Agent New Keynesian model with sticky household expectations that matches existing microeconomic evidence on marginal propensities to consume *and* macroeconomic evidence on the impulse response to a monetary policy shock. Our estimated model uncovers a central role for investment in the transmission mechanism of monetary policy, as high MPCs amplify the investment response in the data. This force also generates a procyclical response of consumption to investment shocks, leading our model to infer a central role for these shocks as a source of business cycles.

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Bibliographic Reference

Auclert, A, Rognlie, M and Straub, L. 2020. 'Micro Jumps, Macro Humps: Monetary Policy and Business Cycles in an Estimated HANK Model'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=14279